State Lotteries

Tweet

I'm not sure what most state lotteries are like, but the payout of the North Carolina state lottery is 50%. I think this is a bit ridiculous for a number of reasons, but I'd like to focus on the fact that this is a worse payout than any of the games in Las Vegas, and I'd like to give you an example to show just how bad of a payout it is. Suppose we play a game where we flip a fair coin. If it lands on heads you pay me $5, and if it lands on tails, I'll pay you $1. Pretty darn unfair, correct? Well, on average after two throws of the coin, there will be one heads and one tails. You will have a net loss of $4, or an average loss of $2 per coinflip. This means that you are keeping $3 of your $5 bet, or that this game has a 60% payout. This is still a 10% higher payout than the NC lottery. While on one hand the lottery isn't supposed to be a winning proposition (in the long run) for people who play it, I think it's very hypocritical to run this bad of a game while all other forms of gambling in North Carolina are illegal. Discuss.