Should Governments Promote the Lottery?

The lottery has become one of the most popular forms of gambling in America, with people spending an estimated $100 billion annually on tickets. Yet the question is whether governments should be in the business of promoting gambling at all, particularly when that gambling exposes some individuals to serious risks. Lotteries are run as businesses, and their primary objective is maximizing revenue by attracting new bettors. But critics charge that they do so by misrepresenting the odds of winning and inflated prize values (prize money for the top prizes in many lotteries is paid out in equal annual installments over 20 years, which means inflation and taxes significantly erode their current value). In addition, the ubiquity of lotteries raises concerns about whether they encourage problem gamblers and contribute to other problems associated with gambling, including addiction and poverty.

Historically, state governments have adopted and promoted lotteries to promote particular social goals or to alleviate fiscal crises. But studies show that lotteries have broad public approval even when a state’s financial situation is robust.

In general, a lottery is a system of distributing prizes by drawing lots. A person places a bet by writing his name and amount staked on a ticket, depositing it with the lottery organizer for shuffling and selection in a prize drawing at some future date. The prize amounts vary, but most lotteries involve a single large prize with a number of smaller prizes.

Making decisions and determining fates by the casting of lots has a long record in human history, including several instances in the Bible. In the 15th century, cities in the Low Countries began holding lotteries to raise funds for municipal repairs and help the poor. The first public lotteries with prize money in the form of cash appeared in Bruges, Ghent, and Utrecht.

Lotteries are also a common feature of political campaigns, and Benjamin Franklin even sponsored a lottery in 1776 to raise money for the defense of Philadelphia against the British. But the fact that lotteries are a major source of income for many states should prompt legislators to take a careful look at the costs and benefits of this kind of gambling.

The first question that should be asked is how much public benefit the average lottery generates compared with the total cost of operating it, including the expenses for promotions and the distribution of prizes. The answer will be crucial to judging whether this is a good use of the public’s tax dollars.