Public Policy and the Lottery

A lottery is a game of chance in which people buy numbered tickets for a chance to win a prize. It is often sponsored by a government as a way to raise money for public purposes. The word “lottery” is derived from the Middle Dutch term lot, meaning “fate,” and it is believed that the early practice of determining decisions and fates by casting lots is of the same root. The modern lottery is a major form of gambling and has been the source of many social problems, including addiction, abuse, and even family violence.

The adoption of state lotteries by virtually all states in the United States has followed a similar pattern: the state legislates a monopoly for itself; establishes a state agency or public corporation to run the lottery (as opposed to licensing a private firm in return for a portion of the profits); begins operations with a modest number of relatively simple games; and, under constant pressure for additional revenues, progressively expands the size and complexity of the lottery. The expansion has often been driven by the desire to generate large jackpots, which are a key driver of sales and publicity for the lottery.

In the context of public policy, the introduction of a state lottery has been argued to be a desirable means of raising funds for state government and other legitimate public uses. Lottery proceeds, for example, have been used to fund roads, canals, and bridges; build homes for the poor; support a variety of social welfare programs; and provide aid for veterans and members of the military. Lotteries have also been instrumental in the financing of public buildings, such as churches and universities. The founders of Princeton and Columbia University financed their institutions by winning the New York state lottery, and the edifices of many other American colleges and universities were funded in part by lotteries.

For individual participants, a ticket purchase could represent a rational decision if the expected utility of entertainment or other non-monetary benefits is high enough to outweigh the disutility of a monetary loss. In fact, the entertainment value of many lottery games is so high that the cost of participation is trivial compared to the prizes offered.

Critics of the lottery argue that the reliance on chance creates many undesirable social problems, such as addictive gambling behavior and its regressive impact on low-income groups. They also contend that the government’s role in promoting a form of gambling runs at cross-purposes with its responsibilities to protect the public welfare. Lottery advertising is alleged to be deceptive, featuring misleading information about odds of winning; exaggerating the potential value of the prizes won (lotto jackpots are paid in equal annual installments over 20 years, with inflation and taxes dramatically reducing their current value); and generally violating ethical standards. In addition, lottery proceeds are sometimes used to finance illegal activities.