Powerball: rational investment or ‘idiot tax?’

What does it mean to be rational?

In terms of economics, it is often presumed that rationality is synonymous with benefiting your own monetary self-interest, investing your resources in the most efficient manner and bringing in maximum returns. Against this measure of rationality, it is clear that many people are prone to act irrationally and perhaps could even be considered irrational creatures. But are human beings really irrational decision-makers, or does such an interpretation of rationality fail to encompass the more internal and subjective “returns” we enjoy?

The past few weeks of Powerball-craze have served as a useful case study for that question. Millions of people across the country shelled out a couple of dollars each – if not more – for a near-zero chance to win a large sum of money. As the colloquialism “idiot tax” implies, this is a bad bet from a purely economic standpoint. However, this does not take into account the more intangible returns, like the thrill a player receives as the winning numbers are called or the excitement that comes from knowing that there is even the slimmest of chance of being the winner. It is not difficult to argue that such a galvanizing experience could be worth the small cost of a lottery ticket.

The problem with the “idiot tax” idea is that it almost assumes that people are only invested in tangible, financial returns. Therefore, making bad decisions in terms of these financial returns is regarded as an “idiotic” decision. However, people are not idiots nor are they terribly irrational; they simply tend to make decisions that meet their emotional and subjective needs as well as their objective needs. To the chagrin of some prognosticators, this makes human behavior appear somewhat unpredictable. However, that does not necessarily mean that this behavior is irrational. In fact, I believe that behaving in a way that increases emotional utility is perfectly reasonable.

Although the recent Powerball frenzy abruptly came to an end last Wednesday night, it is just a matter of time before news of the next big lottery jackpot clouds media outlets. Being counted as one of the many players is not a foolish decision as some cynics may claim, but a reasonable one if you simply have fun playing.

I might just purchase a ticket or two myself.

Matthew Brotz is a sophomore majoring in philosophy.

January 20, 2016


Matthew Brotz

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