In 2021, American citizens spent upwards of $100 billion on lottery tickets, making it the most popular form of gambling in our country. State lotteries generate significant revenues and play an important role in broader state budgets, but the costs are real and should be considered. In this article, I will look at some of the hidden costs that come with state-sponsored lotteries and ask whether those hidden costs are justified.
A lottery is a game of chance in which numbers are drawn at random and if you match enough of them, you win. Generally speaking, the more numbers you match, the bigger the prize. There are many different types of lottery games, but all share a common feature: the prize money is paid out in an irregular way. This is because lottery prizes are usually paid out in annual payments over a period of 30 years, meaning that the actual value of the prize will be less than what was advertised on the TV screen.
Lotteries have a long history in the United States. They were used in the colonial era to finance such projects as paving streets and building wharves. In fact, Benjamin Franklin ran a lottery to help fund cannons to defend Philadelphia against French attacks in 1748, and George Washington sponsored a lottery in 1768 to raise funds for a road over the Blue Ridge Mountains, but the project failed.
Modern lottery laws typically set up a state agency or public corporation to run the lottery, with a mandate to maximize revenues. This is often done in exchange for a monopoly, which allows the state to avoid some of the competitive pressures that would otherwise be present with private firms. State lotteries typically start out with a limited number of fairly simple games, and then grow over time as revenue demands increase.
The problem with this is that as lottery revenues rise, government agencies tend to push the boundaries of their monopoly, promoting increasingly complex games and aggressively pursuing new demographics. This creates an uneasy relationship between the state and private business, as the public interest is pitted against the desire of lottery officials to boost revenues.
Moreover, many people who purchase lottery tickets don’t do so as compulsive gamblers. Most are not investing their life savings, and they are only speculating on the possibility that they may one day stand on a stage with an oversized check for millions of dollars. This type of speculative behavior is morally problematic because it focuses people on the short-term riches that they might acquire through a lucky draw and ignores the biblical injunction, “Lazy hands make for poverty, but diligent hands bring wealth” (Proverbs 24:5).
As the popularity of lotteries grows, the question is whether the resulting trade-offs to society are worth it. The answer depends on whether the profits generated by these state-sponsored businesses are enough to offset the harm they do to poor and problem gamblers.