With Americans spending upward of $100 billion on lottery tickets each year, lotteries are now a permanent fixture in American society. But how meaningful this revenue is for state budgets and whether it’s worth the price of people’s money is debatable.
The concept of drawing names for prizes through a random process dates back to ancient times. The Old Testament instructs Moses to divide land by lot, and Roman emperors would often award slaves and property through this same procedure during Saturnalian feasts and other entertainment events. Modern lotteries include commercial promotions in which property is given away, military conscription, and jury selection. Under strict definitions, though, lotteries are gambling. Payment of a consideration (money or work) is required for the chance to win a prize, which must be of a value that exceeds the amount paid.
State governments have long used lotteries as a way to raise funds for a variety of purposes. They tout them as a “painless” form of taxation, in which voters voluntarily spend their own money for the benefit of a public good, such as education. This argument is particularly effective in times of economic stress, when the prospect of tax increases or cuts to state services seems most imminent. But as Clotfelter and Cook note, “the objective fiscal circumstances of the states do not seem to have much bearing on the timing or popularity of a lottery.”
Lottery participants tend to believe they’re winning for a good cause, even though the odds are against them. Many players have quote-unquote systems, such as choosing their numbers based on birthdays or other personal details, and they may be drawn to particular stores or types of tickets. But the truth is that most people don’t win, and it’s not because they’re irrational or unlucky; they just have long odds.