Public Policy and the Lottery

The lottery is a form of gambling in which people purchase tickets and draw numbers to determine the winners. The prizes may be money or goods. People may play for a small prize or the big jackpot. Lottery profits are often used to finance public projects, such as schools or roads. This type of gambling is a popular activity in many countries. In the United States, there are multiple lotteries operated by different state governments.

The first state to adopt a lottery was New Hampshire in 1964, and the number of states with lotteries now has reached 37. The states that have lotteries generally agree on a few things: they legislate a state monopoly; establish a state agency or public corporation to run the lottery (as opposed to licensing a private firm in return for a percentage of the profits); start with a modest number of relatively simple games; and, due to the pressure to grow revenues, progressively expand the games offered.

During the period of time immediately after World War II, state legislatures saw lotteries as a way to provide services without placing undue burdens on middle-class and working class taxpayers. They believed that the resulting revenue would allow them to expand their social safety nets without increasing taxes. But over the decades, that original dynamic has changed. As states have struggled to keep up with rising costs, they have looked at lotteries as a source of “painless” revenue. Voters want the state to spend more, and politicians look at lotteries as a way of getting tax dollars for free.

It is hard to overstate the importance of this dynamic in the evolution of state lotteries. The initial arguments made for or against their adoption, the structure of the resulting state lotteries, and the way they have evolved over time all demonstrate this important dynamic.

Lotteries are a classic example of public policy being made piecemeal, with little or no overall oversight. When a state adopts a lottery, it makes many fundamental decisions that will shape its future course, including how much to spend on prizes and the type of games offered. But because the decision-making process is so fragmented, the general public’s interests and welfare are rarely taken into account.

As a result, the lottery industry has developed extensive specific constituencies, including convenience store operators (the most common distributors of lottery tickets); lottery suppliers (heavy contributions from these companies to state political campaigns are often reported); teachers (in states in which lotto revenues are earmarked for education); and state legislators (who become accustomed to the large and steady flow of revenue from the games). The poor participate in the lottery at rates that are disproportionately lower than their proportion of the population.

While many people enjoy playing the lottery, they also realize that there is a good chance that they will lose. As a result, they have to decide how much they are willing to risk in order to make the game worthwhile.