Public Policy and the Lottery


A lottery is an arrangement where a prize (often money) is awarded to a small group of people by a process that relies wholly on chance. Lottery arrangements are often used in an attempt to ensure fairness when demand for something is high but supply is limited, such as a competition for units in a subsidized housing project or kindergarten placements at a reputable public school.

State-sponsored lotteries began in the Low Countries in the 15th century and were soon hailed as a painless form of taxation. By the Revolutionary War, they were widely used to raise funds for a wide variety of municipal purposes. Alexander Hamilton wrote that “a great number of people will always be willing to hazard trifling sums for a considerable chance of gain.”

In the United States, state-sponsored lotteries are highly profitable, and they enjoy broad popular support. They tend, however, to have a limited lifespan as a public policy tool, and they are frequently subject to political pressures that can lead to their premature demise. In addition, they are a source of intense competitive pressures from private businesses that operate lottery games and from the states’ own political factions.

Lottery revenues expand rapidly after they are introduced, but then they typically level off or decline over time. The result is a constant need to introduce new game types in order to maintain and even grow revenues. Lottery games are also subject to intense market-based pressures, such as those from convenience stores (whose sales are typically a major share of the total lottery receipts) and suppliers (heavy contributions by lottery suppliers to state political campaigns are widely reported).

Many people who play lotteries develop quote-unquote systems that are not borne out by statistical reasoning about the best times and places to buy tickets and what types of numbers to choose. These players are often convinced that their system will enable them to beat the odds and win the big jackpot.

The lottery is a classic example of the way that public policies are made piecemeal and incrementally, with little or no overall overview and without regard to the general welfare. In the case of a lottery, this is especially true, since most state governments have no coherent gambling or lottery policy and are often dominated by the interests of lottery vendors, the state legislature’s special interest groups, and the lottery operators themselves.

In addition, lotteries are often criticized for using misleading advertising and other practices that are designed to maximize profits, such as exaggerating the odds of winning the jackpot, inflating the value of the money won (lotto jackpot prizes are paid in equal annual installments over 20 years, which is severely eroded by taxes and inflation), and so forth. Lotteries are also subject to various federal laws that regulate their operations. These include laws prohibiting the mailing of promotions and the shipment of tickets through interstate or foreign commerce.

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