Public Policy and the Lottery

A lottery is a method of awarding money or other prizes to participants by selecting them at random. This type of mechanism is often used in applications that have limited capacity but high demand, such as kindergarten admission at a reputable school or a spot in a subsidized housing block. Lottery games also occur in sport and are common in financial markets, such as the stock market or the American football draft. Regardless of their application, many lottery critics object to these practices on the grounds that they are inherently unfair. These objections have evolved over time and reflect both the changing nature of the lottery industry as well as broader concerns about public policy and gambling behavior.

In the early nineteenth century, state-run lotteries were an important source of revenue in both England and the United States. They helped finance a wide range of government projects, including the building of the British Museum and the reconstruction of bridges. In the American colonies, they provided much of the funding for the founding of Harvard, Dartmouth, Yale, King’s College (now Columbia), William and Mary, Union, Brown, and several other colleges, as well as the merchandising operations of the Boston Mercantile Journal.

Lotteries were particularly attractive to politicians casting about for ways to maintain existing services without enraging anti-tax voters. Cohen writes that lottery advocates marketed their new product as “budgetary miracles,” the chance for governments to make revenues appear seemingly out of thin air. They argued that the proceeds from a single ticket would pay for a line item—often education but sometimes elder care or public parks or aid to veterans—and thus relieve voters of their obligation to foot the bill for government.

These claims proved to be persuasive. As lottery proceeds grew, more and more governments approved them. Those in the Northeast and Midwest, with their larger social safety nets, were especially eager to do so. They reasoned that, since people were going to gamble anyway, they might as well get the benefits of government ownership of the business.

In a broader sense, lottery proponents framed the argument in terms of a social contract, arguing that the state’s right to sell heroin amounted to a sort of “voluntary” tax on its citizens. That argument, though it had its limits, gave moral cover to people who supported state-run gambling for other reasons.

Today, state-run lotteries continue to evolve. They start out with a modest number of relatively simple games; gradually, under pressure for more revenue, they add more and more games. In an effort to compete with private commercial lotteries, they also work hard to promote the idea that the game is fair. They do this by citing odds that are, in fact, misleadingly low and by making the payouts seem vastly larger than they are. This strategy obscures the regressivity of lottery earnings and keeps the game popular. But it may not be sustainable. The lottery’s popularity has ebbed before and it will probably wane again.