Two-Time Lottery Winners And The Economics Law Of Diminishing Marginal Utility
By: Tino Buntic
Do you think lightning never strikes twice? Everybody dreams of winning the lottery despite astronomical odds. But what about the very few that have hit the jackpot twice? It has happened, but the odds of winning the jackpot twice are even more astronomical.
Don’t bet on it happening to you. But you can dream. Let’s say you beat the odds and win a megamillions jackpot, say $5 million. That would make you super-happy, right? Of course it would! Now, let’s say that lighting struck again and you win the jackpot a second time. Would that make you twice as happy? No!
To explain why, consider the economics principle of the law of diminishing marginal utility. The law of diminishing marginal utility, as stated in Wikipedia, implies that marginal utility from one additional unit is inversely related to the number of units already owned.
As an example, consider a very thirsty man that is offered a glass of water. The glass of water would quench his thirst and would be very useful to him. Let’s say, now, that he is offered a second glass of water. That second glass of water wouldn’t be as useful as the first glass (it wouldn’t offer as much utility) because the first glass had already quenched his thirst, but it could still help to hydrate him. If he is offered a third glass of water he may drink it but it would not offer the utility that the first two glasses offered. In short, the more he gets the less usefull it is to him. This is the law of diminishing marginal utility.
So, what happens when you hit your first $5 million dollar jackpot? Your life is completely changed! You can buy material things: exotic cars, house, boat, electronics, whatever you want! You can quit your job. You can travel. In other words, $5 million dollars can make you super happy.
If you are one of the lucky few that win the jackpot twice and get a second $5 million winfall, it would be nice but it wouldn’t make you twice as happy. For example, let’s say you quit your job after your first lottery win to have all the time in the world to do whatever you want. A second lottery win cannot buy you any more time; time is finite and you already have it. Maybe a second lottery win allows you to purchase more items like a few more exotic cars. Sure, this can make you happier, but only marginally. You can only drive win car at a time even though you may now own ten.
That’s the law of diminishing marginal utility. Think of it this way: Nothing beats the enjoyment you get from the first time you get something or get to do something you’ve always wanted to do.
Tino Buntic is the creator of TradePals, providing free sales leads and free advertising to business professionals and entrepreneurs across The United States and Canada.
Tino enjoys reading blogs and particularly enjoys The Idea Sandbox Blog by Paul Williams.