The Public Interest and the Lottery

A lottery is a game in which people pay for tickets and then try to win prizes by matching the numbers drawn by a machine. The lottery is one of the most popular forms of gambling in the world, and people spend billions of dollars a year on it. It is also a form of gambling that has many social consequences, especially for the poor and problem gamblers. It is often at cross-purposes with the larger public interest, and states should be cautious about running it.

While making decisions and determining fates by casting lots has a long record in human history (including several instances in the Bible), lotteries for material gain are of more recent origin. The first recorded public lotteries to offer tickets for sale and prize money were held in the Low Countries in the 15th century, to raise funds for town fortifications or to help the poor.

Since then, state lotteries have become popular all over the world and continue to be widely supported by the general public. Some states even have a dedicated lottery earmarked for education. Lotteries have proven remarkably resilient in the face of economic pressures. Historically, they have won broad approval when state governments need extra revenue to fund large public programs. But they have also won public support when the objective fiscal circumstances of the state are good.

Lottery revenues have helped to expand the array of services provided by state government, particularly in the period after World War II. This arrangement allowed states to expand their services without significantly increasing taxes on middle and working class households. But as inflation accelerated, this arrangement began to collapse. In the face of this reversal, state governments turned to the lottery as an alternative source of revenue.

The structure of state lotteries is consistent across jurisdictions: the state legislates a monopoly; establishes a private corporation to run the lottery (or creates a public agency); begins operations with a modest number of relatively simple games; and then tries to keep revenues growing by introducing new games, often by increasing the size of the prize money. Revenues typically expand rapidly at the start, then begin to level off and decline, as lottery players grow bored with the same old games.

In addition, a significant percentage of lottery profits are paid to the vendors of tickets and supplies for the lottery, and these interests have a strong incentive to promote and retain state lotteries. In fact, many state lotteries have a very difficult time making decisions independently from their suppliers and other interested parties. The result is that a state’s lottery policy is rarely informed by a comprehensive and rigorous analysis of its effects on the public welfare. Few, if any, state lotteries have any coherent “gambling policy.” They operate at the margins of the law and with little or no general overview. This puts them at a disadvantage when it comes to defending their policies against the criticism of others.