Much has been written on the (ir)rationality of purchasing lottery tickets (Eliezer Yudkowsky’s viewpoint is particularly fine), but little has been said on applications of these biases that could improve the finances of all of those who buy a ticket.
Now behavioural economists are attempting to boost the historically poor household savings rate byÂ using our lottery-like optimism as an incentive to save:
Psychologists have long known that people tend to overestimate the odds of rare events. Applying that behavioral insight, finance professor Peter Tufano of Harvard Business School has devised a clever program called “Save to Win.” Launched earlier this year for members of eight credit unions in Michigan, it is a cross between a certificate of deposit and a raffle ticket. Members who put $25 or more into a Save to Win one-year CD* are entered into a monthly “savings raffle” for prizes up to $400, plus one annual drawing for a $100,000 jackpot. [â€¦]
In 25 weeks, the program has attracted about $3.1 million in new deposits, often from people who have never been able to set money aside.
* CD = Certificate of Deposit (similar to a savings account).
Established in 01996 […] The Long Now Foundation hopes to provide counterpoint to today’s “faster/cheaper” mind set and promote “slower/better” thinking.
A very admirable goal and one I’m inclined to embrace wholeheartedly. You may have heard of one of their projects, Long Bets. The current featured bet was placed by Warren Buffett with a $1,000,000 stake:
“Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”
I mentioned the foundation previously – when I first found out they produced a series of podcasts/seminars: Seminars About Long Term Thinking (SALT).
A conference on gambling addiction, run by the National Center for Responsible Gaming, is to be held in Las Vegas later this year. Put aside the irony for a moment, there are more sinister events afoot.
Salon’s article Gambling with Science notes that the NCRG is funded by the gambling industry and may have a vested interest in directing research towards certain theories of addiction. Specifically that gambling addiction is not the fault of the casinos.
The industry has successfully defined the terms of gambling addiction; it’s telling that we speak about problem gamblers but not problem machines, problem environments, or problem business practices.
Mind Hacks’ in-depth round-up continues:
The piece is interesting because it shows the significant ambiguity and disagreement at the heart of gambling addiction, the ‘crown jewels’ of the behavioural addiction field.
This is important because there is an increasing drive to reframe existing disorders and medicalise problems of excess as addictions.
Because the legal system determines responsibility, it’s in the industry’s interest to promote theories which say that problem lies largely in the neurobiology of the individual, rather than in their business practices.