The Truth About the Lottery
Lottery is the most popular form of gambling in America, with people spending more than $100 billion on tickets last year. State governments promote it as a way to raise revenue without raising taxes and to help the poor—but is that really what it does? And how much of the prize pool is actually won by lottery participants?
The practice of distributing property, status, and other resources by casting lots has a long record, including several instances in the Bible. But the modern lottery is only about 500 years old. The first publicly organized lotteries in Europe and the United States arose in the late 16th and early 17th centuries. The word “lottery” probably comes from Middle Dutch loterij, a calque on the French word loterie “action of drawing lots,” which itself is derived from Middle Dutch lotzing, meaning “to pull” or “strike.”
Publicly organized lotteries became common in England and the United States for a variety of purposes, including the distribution of prizes for goods, services, and property, the awarding of scholarships at prestigious colleges, and even the sale of units in subsidized housing and kindergarten placements. In fact, the Continental Congress voted to establish a lottery in 1776 in an attempt to raise money for the American Revolution.
State lotteries are now operated in 37 states and the District of Columbia. In general, they are structured as a pool of money from ticket sales that is divided among a set number and value of prizes. The prize value is based on the amount of money that is left after expenses—including profits for the lottery promoter, costs of promotion, and taxes or other revenues—have been deducted from ticket sales.
The majority of lottery players come from middle-income neighborhoods. But the bottom quintile of income earners do not participate in the lottery at a proportionately large rate, and they spend a lower percentage of their disposable incomes on tickets. They may play the lottery for a small number of dollars, but they can’t afford to buy big prizes.
Despite their regressive effects, many lottery players still believe that the games are fair and honest. They have “quote-unquote” systems that they believe will improve their odds of winning, and they spend money on multiple tickets in the hope of winning big. These beliefs may be influenced by socialization, advertising, or other factors. The truth is that the chances of winning a lottery prize are very low. But that doesn’t mean that the lottery is a waste of time for people who are willing to take the risk. And the fact is that, in addition to providing funds for public programs, lottery proceeds also attract tourists and support local businesses. It’s no wonder that states are increasingly relying on the lottery for revenue. But if we want to make sure that the lottery continues to serve its intended purpose, it’s important to understand its costs. A lot of people are losing a lot of money—and they’re doing so for a very uncertain reason.