A lottery is an organized game of chance in which numbers or names are drawn to determine the winner or winners. The prize money can be a fixed amount of cash or goods. Alternatively, the prize fund can be a fixed percentage of the total receipts (i.e., a “50-50” draw). In either case, the odds of winning are generally very low. In the latter case, the organizers run a significant risk if receipts fall short of expectations.
Early lotteries in the Netherlands, for example, were a common way of raising funds to build town fortifications and to support charity for the poor. The practice eventually reached England, where Queen Elizabeth I chartered the nation’s first lottery in 1567. Tickets cost ten shillings, a substantial sum at that time.
But the real reason that lotteries win such broad popular approval is that they can be presented as a means of maintaining a government service without raising taxes. As Clotfelter and Cook observe, politicians are able to claim that lotteries create revenue miracles by convincing the public that a portion of the proceeds will go toward a particular line item in the budget—usually education, but sometimes elder care or public parks, for instance.
As a result, lotteries are often perceived as a good alternative to tax increases, and they can sustain broad popular support even when the state’s objective fiscal circumstances are not particularly dire. Thus, they are a powerful instrument for circumventing the democratic process and the need for a general public consensus on the need for taxes.
In addition, many states rely on lotteries as a source of funding for a variety of other government services that are not easily subject to taxation. These include kindergarten admissions at reputable schools, units in subsidized housing developments, and vaccination campaigns against contagious diseases. In such cases, a lottery can be the only feasible way to satisfy the public’s demand for a limited resource.
Of course, the rich do play the lottery, too; one of the largest-ever Powerball jackpots was won by three asset managers in Greenwich, Connecticut. But the wealthy tend to buy fewer tickets than do people who earn less, and their purchases represent a smaller fraction of their incomes. Moreover, data suggest that the majority of lottery players come from middle-income neighborhoods, and far fewer from high- or low-income ones. Nonetheless, the lure of riches can be alluring. A recent study found that American players spend, on average, a little more than one percent of their annual income on lottery tickets. That amounts to quite a bit of money, especially when you consider that most winners wind up going broke in a few years. The bottom line: lotteries are not only a major form of gambling but also, in many instances, an expensive way to try for the American dream.
