The Problems of the Lottery

The casting of lots to decide important matters has a long record in human history, dating back at least to the Old Testament and probably earlier. But the lottery, based on a betting game in seventeenth-century Genoa, has revolutionized this practice, bringing it into the mainstream of public life. Today state-run lotteries draw billions of dollars from players and generate an enormous amount of buzz. And they are not above using the psychology of addiction to keep people coming back for more.

Lottery is one of those rare forms of public policy that has won wide popularity in times of fiscal stress, when politicians are under pressure to raise taxes and cut services. But it has also won broad support in good economic times. This is because a state’s lottery has been seen as a “budgetary miracle,” as Cohen puts it, a way to swell revenue without the voters having to bear the burden of tax increases or cuts in public spending.

But a number of problems have arisen around the operation of state lotteries. For one, the process of establishing and running them is often piecemeal and incremental, with decisions made largely by special interest groups and bureaucracies. This has resulted in a system that is highly dependent on revenue growth and is subject to frequent changes in policy.

It is also hard to separate the true costs of lottery operations from the revenue they bring in, and this has led to a number of troubling questions, including what percentage of prize money goes to the winner. Many states take a substantial share of ticket sales and prize funds to pay for organizational expenses, promotions, and the purchase of prizes, leaving much less to the players.

In some cases, this has prompted a kind of perverse dynamic in which state officials are pushed to expand the lottery’s offerings and its promotional efforts in order to keep revenues up. As a consequence, the lottery has become a classic example of a centralized, state-run monopoly that is constantly being pressured to grow in size and complexity.

This has been a particular problem in states that have adopted lotteries, like New Hampshire, which held its first modern lottery in 1964, and other states in the late twentieth century. In those states, whose residents have been particularly averse to paying higher taxes, the lottery has become a means of avoiding political debate about increasing income or consumption taxes. But it is a strategy that could prove dangerous in the long run, as more and more people come to think of the lottery as just another way to avoid having to pay taxes. And it may not be long before the entire model is upended. By the end of this decade, all fifty states will likely have a lottery. And that, for a whole host of reasons, is likely to be a very bad thing.