The casting of lots for decisions and fortunes has a long history in human culture, including several instances in the Bible. More recently, lotteries have been used to raise money for public purposes, particularly in Europe after the American Revolution, despite Protestant proscriptions against gambling. A few of America’s oldest colleges owe their existence to lottery funds, and the US federal government has been using lotteries for decades to subsidize its budget.
Despite their popularity, there are reasons to question whether lotteries have any value. For one, they are based on an unproven assumption: that the average person’s expected utility from playing is greater than the disutility of losing money. Moreover, the lottery’s popularity is correlated with the decline in financial security for most Americans—as income inequality has grown, pensions have been cut, health-care costs have risen, and job security has diminished.
In addition, the lottery has become a major source of “painless” revenue for state governments. Politicians use it as a substitute for tax increases that would be resisted by voters and the business community, and the lottery’s reliance on repeat sales makes its operation more efficient than direct taxes.
For example, a state can use the proceeds from its games to cover budget deficits or to fund special projects. A lottery can also help pay for expensive medical treatments, to subsidize welfare benefits, or to bolster local economies, as has been the case with Puerto Rico’s successful efforts to fund a lottery.
A state’s decision to adopt a lottery typically involves many of the same considerations that any other economic enterprise would face, such as market size and competition; the need to meet regulatory requirements; and the feasibility of collecting and pooling all money placed as stakes. In addition, lottery officials must decide what games to offer and what prize sizes to set.
Traditionally, lottery operations have followed a common pattern: the state creates a monopoly for itself; establishes a state agency to run it (as opposed to licensing a private firm in return for a share of profits); starts small with only a few relatively simple games; and, under pressure from legislators, progressively expands its scope of offerings and prize amounts.
In the end, though, it is the lottery’s ability to generate large, disproportionately high prizes that drives its popularity—and a sense of hopelessness among those who do not win. The more dazzling the jackpot, the more people want to play; and the higher the prize amount, the more newsworthy it is in media coverage, which further boosts lottery ticket sales.
It is an illogical dynamic, but it is one that plays out in real life, as well. The fact that people do not consider the consequences of their actions shows that, for better or worse, we are a society of lotteries.
