The Lottery and the State

The casting of lots to make decisions has a long and varied history—Nero was a big fan, for example, and the practice is mentioned in countless biblical texts. Lotteries in the modern sense of the word, however, are quite recent: the first public ones date to the seventeenth century, with the Continental Congress creating one for purposes related to the American Revolution, and European lotteries began appearing in the fifteenth and sixteenth centuries, when towns were raising funds for public works projects by means of them.

As the lottery has evolved over the years, it has become a major source of income for many states. And yet, most states do not have a coherent state gambling policy or even a lottery policy, and the evolution of these institutions is often driven by local economic interests. State officials are therefore at the mercy of the market, and have little control over how the money they collect is used.

The lottery is a classic example of an industry that has outpaced the capacity of the state to regulate it. While it may be tempting for states to rely on the popularity of the games to raise revenue, it is important to remember that gambling is addictive and can cause serious harm, especially when it is promoted by the state. In the case of the lottery, advertising messages can be deceptive, presenting misleading information about the odds of winning (the amount of the prize is typically paid in annual installments over 20 years, with taxes and inflation dramatically eroding its current value); touting the benefits to children or the state (in reality, the money that is raised by lotteries is not significantly more than would be collected in general tax revenues); and suggesting that playing the lottery is a form of social responsibility (in reality, it is regressive).

These practices are at cross-purposes with a state’s role in the wider society. For example, lottery advertising targets people in the 21st through 60th percentiles of the income distribution, whose low discretionary spending leaves them with very limited opportunities for entrepreneurship, innovation, and mobility, and whose purchases of lotto tickets are therefore regressive.

Moreover, research has shown that the popularity of the lottery does not correlate with the objective fiscal circumstances of the state, with the popularity of the game rising in times of economic stress and declining when state governments are cutting taxes and other expenses. The argument that the lottery serves a specific public good is therefore flawed, and should not be a primary basis for state policy. Instead, a better alternative is to focus on policies that promote economic opportunity and support social mobility. That includes investing in education, which is the best way to reduce inequality and increase opportunity. A broader economic agenda should also include expanding health care and childcare. These investments are far more likely to yield lasting prosperity for the country than more short-term programs, such as tax cuts and government debt reduction.

Posted in: Gambling