For a person who is without illusions about probability, what is there to lie about lottery games? This is a question answered in NASPL Insights April 2014 by my friend M., the gambling economist. I don’t mean an economist of the gambling industry- I mean an economist who likes to gamble.
I have the good fortune to know M., an accomplished economist who also likes to play the lottery. From him, I have learned perspectives on the lottery enterprise that I have heard from no one else. One of the first things I learned is that to an economist, the cheapest games the lottery sells are the ones that cost the most to play. M also introduced me to the idea of “likely cost”, that is, for a certain intensity of play, how much money he expects to lose. These are key concepts for understanding the winning experience of players, and what it takes to keep them engaged while making money for the lottery. My first account of M and his teachings was published in NASPL Insights June 2013
In Washington State, the lottery shares its sales forecasts with state economists, who are accustomed to forecasting all sorts of revenue of the basis of economic and population variables. Taking their lead, I found that I could account for a long, quarter-by-quarter history of instant game consumption on the basis of population, cost of living, unemployment, and so on- without taking into account anything that the lottery was doing. With forecasts of these driving variables, it is possible to make quarter-by-quarter forecasts of instant game consumption that are as accurate as other revenue forecasts. I apologize for the tight academic style of this article; I was still transitioning from hard science! NASPL Insights October 2011