The Truth About the Lottery

The Truth About the Lottery

The lottery is a popular way for states to raise money for education, roads and other public works projects. People buy tickets in a variety of ways, including at convenience stores, churches and fraternal organizations, gas stations, restaurants and bars, service stations, and even newspaper stands. The National Association of State Lotteries reports that in 2003, nearly 186,000 retailers sold the tickets. Some retailers sell tickets exclusively for a particular lottery, while others sell them in conjunction with other types of gambling, such as slot machines or scratch-off games. Some of these retailers also offer online services.

Although the drawing of lots to determine ownership or other rights is recorded in many ancient documents, modern lotteries became widely established after the early seventeenth century. Benjamin Franklin supported the use of a lottery to fund his militia in 1748, and George Washington used a lottery to finance construction of the Mountain Road in Virginia.

When the lottery was first introduced in the United States, politicians viewed it as a way to help expand the array of state services without burdening working families with especially onerous taxes. In the decades immediately after World War II, lottery revenues grew rapidly, but in the 1970s they began to level off and eventually decline. Lottery officials responded by introducing innovations that expanded the types of games offered and tried to increase public interest.

Despite the fact that they know they are unlikely to win, many people continue to play. The reason is that they believe the lottery offers them a last-best chance at improving their lives. There is a perverse psychological rationale behind this behavior: It feels good to believe that the improbable—and statistically unfavorable—possibility of winning a huge jackpot can give them a fresh start.

The lottery industry has made a point of emphasizing the entertainment value of the game and promoting it as a safe alternative to gambling. But critics have charged that lottery advertising is deceptive, presenting misleading information about odds of winning; inflating the value of the money won (lotto jackpot prizes are usually paid out over 20 years, with inflation dramatically eroding its current value); and so on.

Although some state lotteries offer a small percentage of their revenues to educational purposes, most devote the bulk of their profits to games and other marketing activities. This results in a highly skewed distribution of funding. Lottery proceeds are disproportionately allocated to the wealthy, while lower-income citizens are denied essential services. This inequality is a central problem in the lottery debate. It is important for policymakers to consider the social costs of a lottery and ensure that the benefits of the game are shared more broadly. By doing so, they will increase their chances of attracting a larger and more diverse group of voters. And a bigger and more diverse voter base may make state lotteries more palatable to the general public. —James L. Wright, a senior fellow in economic studies at the Brookings Institution and author of The Economics of the New Rich.