![\"National](\"https:\/\/handyvandal.com\/wphv\/wp-content\/uploads\/2009\/09\/national-lottery2.png\" "\\"National")
Some interesting observations by Sabik, over at Boing Boing, about rationality and gambling:<\/p>\nSome interesting observations by Sabik, over at Boing Boing, about rationality and gambling:<\/p>\n
\n… Under some circumstances it is in fact rational to gamble (and to get insurance …). The reason is that the utility of money is not linear.<\/p>\n
As one gets more and more rich or further and further into debt, the difference made by an additional pound diminishes. It’s not a symmetrical, simple curve, but overall it’s roughly S-shaped.<\/p>\n
Thus, it’s rational to gamble when one is in debt, for a jackpot of not much more than twice the size of the debt; in that case, the pounds won will have bigger marginal utility than the pounds bet.<\/p>\n
Of course, one would prefer to play a game that has a good return \u2014 UK Lotto’s 50% is not really very good \u2014 but even then it may still be rational.<\/p>\n
A similar argument would show that it’s rational to insure generally when one is not in debt; however, the curve is not symmetrical and in addition there are the non-monetary costs, so it’s probably rational in a wider range of circumstances.<\/p>\n