Negative Expected Value

 

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Negative Expected Value:   The Ultimate Triumph of Loss.

Summary: Though  only one form of predatory gambling,  lottery  illustrates how and why predatory gambling drains not only the gambler  but also everyone around each gambler from whom he or she can winkle or steal a dollar to pursue “the chase.”   Using a simple model of lottery, this essay distinguishes “wins” from net gain, showing that unless a compulsive  gambler quits, “extinction” is inevitable.  Every rational person knows this. Sad to say,  however, most people deny  how badly  trusting persons around the gambler will be hurt as the gambler fends off   the inevitable.  “The gambler’s ruin” is not confined to  him or her.   This is the central evil of predatory gambling.

Adam  Smith wrote about  lottery  “That the chance of gain is naturally overvalued we may learn from the universal success of lotteries.  The world neither ever saw, nor ever will see, a perfectly fair lottery; or one in which the whole gain compensated the whole loss; because the undertaker could make nothing by it . . .  There is not, however, a more certain proposition in mathematics than that the more tickets you adventure upon, the more likely you are to be a loser.  Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets the nearer you approach to that certainty.”   Wealth of Nations book I Chapter 10 p 153

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