In the US alone, people spent upwards of $100 billion on lottery tickets in 2021. State lotteries are often billed as painless ways to raise money for public purposes, but just how meaningful that revenue is in broader state budgets, and whether it’s worth the trade-offs of people losing lots of their own hard-earned money, warrants close examination.
For one thing, lottery play is rife with irrational gambler behavior. Despite the fact that the odds are long and the jackpots are disproportionately small, players still spend large sums of money on a weekly basis in the hopes of winning a prize far exceeding any other financial investment they might make in a year. And a big prize can be very appealing to the financially disadvantaged, who are disproportionately drawn to the games.
People’s fondness for lotteries has a long history. In the 17th century, when state lotteries first started to proliferate across Europe, they were a popular way to pay for things like town fortifications, aid to the poor, and other public needs. They also provided an alternative to paying taxes. But a key issue with state-sponsored lotteries is that they aren’t as transparent as other forms of government funding. In most cases, people don’t realize that the portion of their ticket purchase that goes toward prize money is effectively an implicit tax rate — one that can be quite high.
While the majority of lottery ticket buyers are not wealthy, they tend to be disproportionately lower-income, less educated, and nonwhite. In a world of shrinking social welfare safety nets, these groups have become more reliant on the lottery for help, and that’s a big part of why it is so popular among them. In fact, studies show that the majority of Americans who buy a lottery ticket at least once in a year do so on a weekly basis.
Lotteries are also a source of controversy because of how they attract a certain type of person. As a rule, those who play the most frequently and spend the most money do not have a college education, have a job, or own their own home. The result is a system that, despite its popularity and success, can also have an ugly underbelly.
The idea of giving away property or slaves through chance has a long history, going back to the Old Testament, where Moses is instructed to take a census of the people of Israel and divide their land by lot. Later, Roman emperors used lotteries to give away property and slaves during Saturnalian feasts. But today, most people who play the lottery are not rich, and they know their chances of winning are long. But for those who do not see a future for themselves in the labor market, it is easy to understand how the hope that they might get lucky, even though it is irrational and mathematically impossible, is worth the purchase price of the ticket.