Lottery: A Contest of Chance
The lottery is a form of gambling in which tickets are sold and the winners are chosen by chance. Its roots go back to ancient times. The Bible contains dozens of references to lottery-like games, and the Romans used them as entertainment at dinner parties or during Saturnalian festivities. By the 17th century, European lotteries were a common feature of public life. In colonial America, lotteries helped finance a wide variety of public projects, including roads and libraries. During the American Revolution, Benjamin Franklin held a lottery to raise money for cannons for Philadelphia’s defense. But many lottery winners go bankrupt shortly after winning, and others find that their winnings quickly run out.
For the individual who buys a ticket, the entertainment value or other non-monetary benefits of playing are expected to exceed the disutility of a monetary loss. For the state that runs the lottery, its goal is to maximize revenues, and it must therefore promote the game to the maximum extent possible. This promotion inevitably leads to a distortion in the allocation of resources, which can have serious social consequences.
A second issue is that the lottery’s success largely depends on its popularity among lower-income individuals. The vast majority of lottery players and revenues come from middle-income neighborhoods, while high-income residents play the game at a much smaller rate than their percentage of the population. This distortion distorts tax revenue, and may lead to regressive policies in other areas of government spending.
In addition to the distortions caused by the lottery’s popularity among lower-income groups, there are a number of other concerns associated with its operation. One is that it creates a perception of state dependency on lottery revenues, and this may have implications for the budgetary independence of the state. The other is that the lottery undermines state accountability, by transferring the responsibility for decision making to the players and by removing any incentive for elected officials to scrutinize the operations of the lottery.
Moreover, the lottery is an example of an area in which state policy has evolved piecemeal and incrementally, without any broad overview. As a result, few states have any comprehensive “gambling policy,” and the overall public welfare is rarely taken into account in the evolution of the lottery. Moreover, because the lottery is run as a business with a focus on maximizing revenues, it operates at cross-purposes with the larger public interest. As a consequence, the promotion of the lottery is not aligned with the broader public needs of the state. This is not a recipe for long-term success. It is important to recognize these problems and to address them. The future of state lotteries must be based on the premise that they serve a legitimate public purpose and do not erode the fiscal autonomy of the states. This will require a thorough examination of all options for promoting the lottery and a careful evaluation of its impact on state finances.