Friday, July 08, 2005

Lunchtime Notes: "Worst Analysis Ever" Contest Entry

by Tom Bozzo

Via Jay at Folkbum, at this hour I am in the process of raising my jaw from my keyboard shelf after reading an astonishingly misconceived analysis from the Milwaukee Journal Sentinel of why the Wisconsin Lottery is a bad deal for the poor.

The JS analysis looked at payout rates versus poverty rates by ZIP Code, and purports to show lower payout rates for relatively poor ZIPs. The problem is, payouts are only linked to recipients' ZIP Codes for larger prizes which must be redeemed directly from the lottery. Those comprise a small minority of the lottery's payouts — 6.3% of revenue for the studied ZIP Codes, for a lottery that casual research shows to pay out about 56% of revenue as prizes. This is like trying to draw conclusions about employment patterns from data that excluded, say, the private sector.

While the misuse of the lottery data is egregious, the real problem is that the JS misses the forest for the critters frolicking on the forest floor. Anyone with half a brain should be able to figure out that the reason the poor are screwed by the Wisconsin lottery is that it is a reverse Robin Hood scheme of remarkable crassness, in addition to the usual problem that players are taking 'unfair' bets (*). Unlike some lotteries that at least purport to do some social good by remitting their proceeds to programs benefiting, say, senior citizens (PA) or education (NY), the Wisconsin lottery's proceeds net of prizes and expenses are paid to me, and people like me: owners of 'homestead' residential property. To reduce my tax bill by last year's $110.42, someone — most assuredly not me — played and lost the lottery 2.4 times per week (**). This, as one might say, can't possibly be efficient.


(*) In the sense that the expected payout is roughly minus 44 cents on the dollar.

(**) Based on a $1 bet and considering the lottery approximately 12% overhead.
I hope you wrote the editor and the author.
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