Lottery is a gambling game in which numbers are drawn and prizes allocated by chance. It is an ancient pastime—lotteries were common in the Roman Empire (Nero was a fan) and are attested to throughout the Bible, from selecting the next king to deciding who gets to keep Jesus’ garments after the Crucifixion. In more modern times, people use the lottery to fund everything from civil defense to public works projects. In the United States, it is now a major source of income for state governments, which can distribute the proceeds without infuriating anti-tax voters.
The odds of winning are absurdly low, but so are the prize amounts. The New York Lotto, for example, has one-in-3.8 million chances of winning the grand prize—and still sells billions of tickets every year. The same is true of state-wide games like Mega Millions, Powerball, and the Florida Lotto. As a result, many states have begun to raise the jackpots and increase the number of available numbers to try to keep ticket sales up.
In the long run, this strategy will backfire: The more likely someone is to win, the less he or she will spend. This is because people will rationally choose to spend a smaller amount for a higher probability of winning. But a larger prize will reduce the expected utility of each ticket, making it harder to justify purchasing another, and so on.
This is why lottery commissions aren’t above availing themselves of psychology and marketing to keep players coming back for more. It’s not that different from the strategies of tobacco companies and video-game manufacturers, only it isn’t done under the auspices of the government.
A lottery is not only an effective way to raise money for a worthy cause; it’s also a popular and accessible form of entertainment. Most people can buy a ticket—whether the purchase is an act of charity or mere conspicuous consumption—at grocery stores, convenience stores, and even gas stations, provided that those places are licensed to do so by the state. Many online tools help lottery players locate licensed retailers.
In an era when the national debt is at a record high, lottery revenues are proving to be an important source of revenue for many states, which can’t rely on tax increases to fund needed public goods and services. Indeed, a recent study by the Center on Budget and Policy Priorities found that state lotteries raised about $41 billion in 2014.
But there is a serious question as to whether these funds are being spent wisely. Some states allocate the proceeds to education, but other states divert them into other programs and into unaccountable special interests. Moreover, most state lotteries are not well-governed or transparent. These concerns should be weighed carefully before lottery proceeds are earmarked for any purposes, including education.