In a time when state governments are increasingly strapped for revenue, lottery proponents argue that it is a low-cost alternative to taxes and other forms of public borrowing. But how does this claim hold up? Research shows that, on balance, lotteries are a bad deal for most players. The odds of winning are infinitesimal, and the resulting windfall is often used to fund short-term expenditures that will soon be spent or lost. In addition, the money is generally subject to taxes, and it may not provide the long-term benefits that are claimed.
The history of lotteries is a long and complicated one. In the ancient world, lotteries were commonly used to decide who would be the priest, scribe or other public office; they were also used as a means of collecting debts and allocating property. The first modern lotteries, however, were not created for financial gain, but rather to raise funds for public works projects. Lotteries were initially popular with both the public and political leaders, as they did not impose any particular burden on those who did not participate.
State lotteries are a classic example of how government makes policy, with the evolution of each lottery program typically driven by pressures from those seeking new sources of revenue and competition from other states offering their own products. The result is a series of often overlapping programs that are largely uncoordinated, and that leave the general welfare at best in a state of flux.
Today’s state lotteries typically offer a wide range of games, with winners chosen by drawing lots at random from tickets purchased by the public. The prizes vary from small cash sums to large jackpots, with the amount of the prize growing over time as more tickets are sold. Lottery advertising frequently emphasizes the size of the potential prize and its “life-changing” possibilities, a strategy that has proven successful in garnering public support.
Despite the slim chance of winning, lottery tickets are often bought for the entertainment value. They allow people to fantasize about paying off their debts, buying a bigger house or taking an exotic vacation, says Dr. Fern Kazlow, a clinical psychotherapist in New York City. “The five dollars you spend for a ticket gives you an opportunity to have some pleasant fantasizing for awhile,” she says.
While the public is generally supportive of the idea of state lotteries, there are concerns about the impact on social and economic equity. For one thing, studies show that the bulk of lottery revenues and participants are drawn from middle-income neighborhoods. This is in sharp contrast to the lower-income groups, who tend to play other types of gambling. The result is that the poor are disproportionately excluded from the financial prosperity that the lottery promises. The fact that the money is often paid in annual installments, instead of a lump-sum, further reduces the attractiveness to low-income communities.