Long-run Effects of Lottery Wealth on Psychological Well-being

Here is a new NBER working paper from Erik Lindqvist, Robert Östling, and David Cesarini:

We surveyed a large sample of Swedish lottery players about their psychological well-being and analyzed the data following pre-registered procedures. Relative to matched controls, large-prize winners experience sustained increases in overall life satisfaction that persist for over a decade and show no evidence of dissipating with time. The estimated treatment effects on happiness and mental health are significantly smaller, suggesting that wealth has greater long-run effects on evaluative measures of well-being than on affective ones. Follow-up analyses of domain-specific aspects of life satisfaction clearly implicate financial life satisfaction as an important mediator for the long-run increase in overall life satisfaction.

In other words, it is good to have more money.


Imagine the benefits that UBI might produce in our human society. Or just reject it out of hand, without even trying, and let life go on as it has for thousands of miserable years.

Imagine we do not give people $500 a month for doing nothing. Imagine the benefits of *requiring* people to earn $500 a month? Imagine the benefits of a poll tax that forced every adult male to get off the couch and earn some money?

That way instead of encouraging talentless teenage boys to sit in their parents' basement trying to become the next Great American Poet, we would encourage them to pay attention in school, major in something useful and get a damn job.

It blows the mind really.

That is 62.5 hours at US$ 8.00 a hour.About one-third of a standard working month.

I have no idea about UBI. But my impression is we are running out of things for people with the archetypal 10th-grade-education-and-a-strong-back to do. Practically speaking, we already have UBI for the lumpenproles, the elderly, and the disabled.

I'm deeply pessimistic about human nature but that's just me. Even a pessimist would have a hard time arguing that we aren't, again--practically speaking, abolishing Scarcity.

Ethically, I can think of no reason why the top percentiles should be deciding among yachts before some humans still have potable water. In ten years, the debate will be over air conditioning. The counter-argument is that rising living standards are the product of allowing the upper percentiles to make as much money as they want.

Obviously, we aren't talking Star Trek-level abolition of Scarcity, and even Star Trek has to deal with the finite amount of matter/energy in the universe, but our bigthinkers need to start contemplating practical and ethical implications of the abolition of Scarcity.

"But my impression is we are running out of things for people with the archetypal 10th-grade-education-and-a-strong-back to do."

Until you try to find someone like that.

Is it a problem with finding someone like that or finding someone not drug-addicted or criminal like that?

"I have no idea about UBI. But my impression is we are running out of things for people with the archetypal 10th-grade-education-and-a-strong-back to do. "

I think the UBI is a pretty bad idea. It's just welfare with a slightly different spin.

The US should IMO, expand the EITC. This would allow us to transfer income to people but only if they worked. Furthermore, it should include a lowering of minimum wage, so that the number of effective jobs would increase.

My assumptions are that it would be paid for with an additional FICA tax. It would be roughly half of minimum wage. It would be universal (ie everyone would get the same benefit regardless of income). It would require some basic verification of actually working. Minimum wage would be reduced corresponding to the amount of the EITC.

It's not perfect, but it's far better than UBI.

UBI is inherently predatory. Any concerns?

Dude, you need to go back in time 100 years, then come back and reevaluate that drivel.

"...and let life go on as it has for thousands of miserable years"

Life going on the same as it has for thousands of miserable years?
Sounds like somebody really needs a dose of Hans Rosling:


The more interesting question is not whether giving people some money made them happy, but whether giving them more money than everyone else made them happy.

Is it the absolute standard of living? The relative comparison - are they happy because they are so much better off than their High School class mates (in which case is happiness a zero-sum game as their friends become less happy)? Or is it a matter of expectation - did they think they would be lower middle class for life and then suddenly they were raised up beyond their wildest dreams?

All of these have policy implications.

There is a converse to this ... examine the remaining life satisfaction of someone who has been fined a large chunk of their assets. Usually this occurs through some antisocial action that breaks the law. But there is a unique situation (as far as I know) in a divorce where the person who has assets confiscated has no blame.

Indeed it's not blame, it's liability.

Can't open the paper from my current location, but I wonder about how much they won and how it was paid out. Also wondering about external validity outside Sweden; a new millionaire in Sweden and Las Vegas will likely have very different life courses after the win.

Indeed, lump sum payments or annuities can make the difference.

Also, winning the lotto implies seeing how your prize is eaten away by taxes. Paying a large sum in taxes can be accepted with a yawn in Sweden while leaving an emotional scar to people in other places.

Our study includes both winners of lump-sum prizes and winners of monthly instalments paid out over 10-25 years. We find more positive effects for the lump-sum prizes - which is not what you would expect if lottery winners suffer from self-control problems. Yet since this is one of several heterogeneity analyses, we take care not to push this result too much as there is a risk of false positives due to multiple hypothesis testing.

Hello, thanks for answering =)

Well, there goes my prejudice against winners with self-control issues. As you mention, it's not right to throw several hypothesis until they fit the data.

Isn't the story in the US that half of those who won big money (multimillion) dollar lotteries were bankrupt within five years?

The idea is firmly imprinted in the public imagination that if you have two or three million dollars then you can own an impractically powerful car, an unnecessarily luxurious boat and maybe even an aeroplane or helicopter. Therefore someone suddenly acquiring that wealth may well go out and buy these or similar things. Then he finds they are very expensive to run as well as to buy, and the money runs out. Of course what a sensible person should to is to use the money to buy time and freedom from wage slavery, ie invest it wisely to pay an income to replace wages or salary.

And a bunch of people come out of the woodwork to wheedle you out of the money you acquired.

There is this classic post about how bad it is: https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_won_a_656_million_dollar_lottery_what_do/ It has sources for many of it's claims so it's not just made up, but it lacks sources for the statistical claims it makes.

Isn't the lottery predatory? It's not Warren Buffet buying all those lottery tickets. Most of those who buy lottery tickets do not understand the chance of winning, believing as they do that buying two tickets doubles their chance of winning. In my state, the head of the department of education championed the adoption of the lottery (this was many years ago), claiming that all the revenues from the lottery would go to education. Of course, that was a fallacy, as the legislature merely cut appropriations by the amount of the revenues from the lottery. Like most state and local taxes, the lottery is just another regressive tax. Two days ago the annual report on the financial condition of medicate and social security was released. As was expected, the regressive tax cut passed last year has exacerbated an already challenging situation. The solution is another increase in the regressive payroll tax, to offset the income tax cut that mostly benefited the wealthy. I suppose the lesson is that one may not be able to fool all the people all of the time, but one can fool enough people enough of the time to guarantee a long-run decrease in overall life satisfaction.

Are these definitions correct?
"regressive" = payable by lots of voters. (eg income tax)
"progressive" = payable by a small number of voters to benefit many voters. (eg Hitler's "Jew Tax")

Calling something wholly optional a tax does violence to the English language.

Most if not all taxes are optional.
Don't like income tax? Don't earn anything.
Don't like GST/VAT? Don't buy anything.
Don't like alcohol duty? Don't buy alcohol.
Don't like fuel duty? Don't go anywhere, or have an electric car and charge by sunlight.
Don't like speeding tickets? Keep within the limits.
Don't like parking charges? Don't visit town centres.
Even death tax is avoidable - don't have any assets.
All this is possible if you do voluntary work in exchange for board and lodging.

Buying two tickets does double the chances of winning.

If you double a very small number you still get a very small number.

I haven't checked my MEGA Millions tickets. I'll get back to you.

It seems like the stories of lottery winners ending up worse than before are just sour grapes anecdotes the rest of us tell ourselves because the alternative of seeing others achieve wealth and happiness beyond our reach through pure luck is too hard to bear. This same phenomenon appears elsewhere too; we tell ourselves rich people are unhappy because they can’t appreciate the simple things or that heirs are unhappy because they never got the motivation to achieve anything. In reality, the happiest people I know are the ones with significant unearned wealth. I’d guess that virtually all of us would be happier if we had a few million dollars, especially if we got that money early in life while we still have lots of time to enjoy it.

Happiness is closely linked with out ability to access things/places/people we like. Most things is this world have a price tag, that's why money makes people happy whether it's a gift to your kids, a BMW or a trip to Tokyo you will need money to pay for it. It's not everything but give you great possibilities on getting to taste a lot of goodies.

Happiness - Health, Love, Wealth, and Time to enjoy them.

I often think that growing up I was the richest kid I knew. We had little money but I had love in strong supply: a loving, large extended family,. each of whom loved me better than I them.

So you were the family jerk?

The estimated treatment effects on happiness and mental health are significantly smaller, suggesting that wealth has greater long-run effects on evaluative measures of well-being than on affective ones.

This is why you should take happiness research with a grain of salt. Measuring happiness alone can't even tell if you won the lottery!

Why would we care whether the lottery makes the few winners happier?

It seems to me that the effect on the losers and non-players might have more of a claim on our interest. Potential increases for a handful of lottery winners in "overall life satisfaction but not happiness" are probably more than offset, in my large state, by the aggregate unhappiness/grumbling of those of us who hate the thing, and think it's an awfully roundabout and inefficient way for the government to: spend a lot of money on marketing and staffing an agency several-hundred-people-strong, in order to claw back some part of the money it spent on a certain demographic; then laboriously return the larger portion of that to the same; before finally depositing a fraction of it into the hands of school administrators, easily the worst people on the planet.

There are those smaller prizes, of course. I don't know much about those but it seems like the pleasure there is mainly in the peeling, as with scabs, green stamps and temporary tattoos.

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