Is it Good for the State to Promote the Lottery?

The lottery is a way for states to raise revenue without raising taxes or cutting social programs. It works by having people voluntarily spend money on tickets in the hope of winning a prize that is determined wholly or mostly by chance. It’s a popular form of gambling, with more than half of all American adults playing it at least once in their lifetime. But is it a good thing for the state to be in the business of promoting such a behavior? It seems to run at cross-purposes with the larger public interest, and there are some serious questions about its societal impact.

Traditionally, lotteries functioned like traditional raffles, with the public purchasing tickets for a drawing that would occur at some point in the future—usually weeks or even months. Then, in the 1970s, state lotteries were revolutionized by innovations that allowed them to offer prizes instantly to people who purchased a ticket. These instant games, known as scratch-off tickets, offered smaller prize amounts in the 10s or 100s of dollars and much higher odds, on the order of 1 in 4. The popularity of these games quickly exploded, making them a major source of revenue for most state lotteries.

Lotteries now offer a wide variety of games, from the popular Powerball and Mega Millions to local scratch-offs and daily numbers games. But despite their popularity, they still suffer from the same problem as other forms of gambling: They tend to be more regressive than progressive, with poorer players more likely to play them. And while the large jackpots that often characterize these games drive sales—and generate newsworthy headlines—they also make it harder for a player to win, which reduces the average payout.

A lot of people who play the lottery think that they’re going to be the one who hits it big, and they’re willing to spend a small percentage of their income on tickets in the hopes of getting rich. Some even form syndicates and buy lots of tickets in the hopes of hitting the jackpot. But a good many of these people wind up broke shortly after winning the lottery, because they’ve mismanaged their newfound wealth.

But what’s behind this tendency to treat lottery winnings as a path to prosperity? Part of the answer lies in the fact that many state lotteries have long been characterized by a high rate of “selection error.” That is, many players end up buying tickets for games with low odds of winning.

Another factor is that the popularity of lotteries does not seem to be tied to a state’s actual financial situation, as evidenced by the fact that lotteries have enjoyed broad public approval even in periods of fiscal stability. Finally, it’s important to recognize that most states’ lotteries are largely public-private partnerships, with the state establishing an agency or corporation to run them (as opposed to licensing a private firm in return for a share of the proceeds). This structure allows for more flexibility and innovation when it comes to game offerings, but it also means that the state must continually seek new sources of revenue.