Public Policy and the Lottery


The lottery is a form of gambling in which numbers are drawn for prizes. It is a popular way to raise funds for many purposes. Several states use it to raise money for public education, and some also use it to promote tourism. Its popularity is partly due to its low cost compared with other forms of raising revenue. Despite its widespread appeal, there are some concerns about the lottery. One is that it may lead to addiction and other problems for people who play. Another is that it can be a waste of money.

Lottery is a classic case of how public policy in general and state-level lottery policy in particular evolves piecemeal with no overall or long-term plan. Because of the political power that is involved, lottery officials often have a very difficult time balancing the interests of the general public with those of the industry. In addition, since state lottery profits are not tax revenues, they are frequently used as a political tool in an antitax era, and pressures on officials to increase the prize amounts are constant.

In the early days of American democracy, the Continental Congress tried to establish a lottery system to raise funds for the revolution. Although that effort failed, the practice of holding lottery games in America continued to grow rapidly. By 1832, a Boston Mercantile Journal article noted that 420 lottery games had been held that year alone. Privately organized lotteries were also common, helping to build the early American colleges such as Harvard, Yale, Dartmouth, and King’s College (now Columbia).

State-sponsored lotteries are a major source of gambling revenue in the United States, with more than $100 billion spent on tickets each year. Most of the revenue is derived from a flat percentage of ticket sales, but a significant amount comes from advertising and other marketing activities. Lottery promoters argue that the revenue from the games benefits a variety of public uses, and they have gained broad public approval. In fact, the popularity of lotteries is not related to a state’s actual financial condition; studies show that public support for lotteries is independent of state governments’ fiscal health.

In talking with lottery players over the years, I have been struck by how steadfastly committed they are to playing the game and spending large sums of money. Their behavior defies all the conventional wisdom that people who spend a large part of their income on lottery tickets are irrational and have been duped by advertising. In reality, a person’s decision to purchase a lottery ticket can be based on an expectation of utility that combines entertainment value and the satisfaction of overcoming a significant risk. This makes the purchase a rational decision for a given individual, even though the chances of winning are very low. This type of utility, sometimes called expected value, can outweigh the disutility of a monetary loss. For a large number of people, it does. This is why so many people continue to buy tickets.

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