Public Policy and the Lottery


A lottery is a contest in which tokens are distributed or sold and the winner is chosen by lot. The winners may be awarded prizes such as money, goods or services. In the context of government, a lottery is a way to raise funds for a specific purpose such as public works, education, etc. In the United States, there are several state-run lotteries. The state’s legislative and executive branches regulate the operation of a lottery. In addition, many private companies offer lottery services. In general, the odds of winning are low. People play the lottery for a variety of reasons, such as the desire to become rich, the belief that they are helping to improve society or simply because they enjoy gambling. However, there are some significant issues surrounding the lottery that should be taken into account.

Lotteries are a classic example of public policy made piecemeal and incrementally, with no overall vision or direction. Each new lottery begins with a modest number of relatively simple games and then, as pressure for additional revenues builds, progressively expands its offerings. In the process, it often creates significant specific constituencies such as convenience store operators (whose advertising is heavily promoted); suppliers of the goods and services offered by the lottery (heavy contributions to state political campaigns are frequently reported); teachers (in those states in which the proceeds are earmarked for education); and state legislators (who quickly grow accustomed to the steady stream of cash).

While the lure of a big prize is always appealing, the fact is that purchasing a ticket requires an investment of a very small amount of money for the chance of a large return. Lotteries therefore represent a substantial loss to the economy as a whole, especially given that those who purchase tickets could be better used for other purposes such as investing in education or retirement. As a form of gambling, the lottery can lead to addiction, and some argue that governments should not be in the business of promoting vices, even if they do generate significant revenue.

Governments have long imposed sin taxes on vices such as alcohol and tobacco, with the justification that the increased cost will discourage people from engaging in them. While lottery participants can become addicted to gambling, the ill effects are generally less costly in the aggregate than those of alcohol and tobacco.

In addition, critics charge that much of the advertising for the lottery is deceptive. It commonly presents misleading odds of winning; inflates the value of money won (lotto jackpots are usually paid in equal annual installments over 20 years, with inflation and taxes dramatically eroding the current value); and so on.

In the immediate post-World War II period, many states used lotteries as a means of expanding the range of their services without raising onerous taxes on middle and working class citizens. But as the costs of social welfare rose, that arrangement began to break down. Now, with states facing declining revenues and a growing inequality gap, they look to the lottery to fill the void.