Public Welfare and the Lottery
The lottery is a popular form of gambling in which participants purchase tickets for a chance to win prizes, such as cash or goods. Historically, the practice dates back to ancient times: Moses instructed his followers to divide land by lot; Roman emperors used lotteries to distribute slaves and property during Saturnalian feasts; and European royalties and noble families often conducted elaborate private lotteries to distribute titles, properties, and other riches. Today, state governments frequently promote and organize lottery games to raise revenue for various public uses, from paving roads to building schools. In the process, they create widespread addiction and dependency, expose players to psychological hazards of gambling, and deprive the poor of opportunities to invest their money wisely.
The state’s monopoly on lottery operations gives it the power to make decisions about prizes, ticket prices, and other aspects of the game that affect winners and losers alike. Many critics contend that this control over prize allocation is a clear violation of the principle of equal treatment under the law. The prevailing wisdom is that the lottery’s popularity and high revenues justify its role as a public good. Yet it is important to understand the extent to which lottery promotion and participation erode public welfare.
In many states, lottery advertising is blatantly misleading. It commonly presents misleading odds about winning the jackpot and inflates the value of money won (lottery jackpots are paid in equal annual installments over 20 years, with inflation and taxes dramatically eroding their current values). In addition, lottery advertising frequently targets specific constituencies: convenience store operators; lottery suppliers (heavy contributions by these companies to state political campaigns are reported); teachers (in states where lottery revenues are earmarked for education); and state legislators (who quickly grow accustomed to the extra revenue).
A large percentage of people who play the lottery do so in the belief that they are “due” to win. Yet any set of numbers is as likely to appear in the next drawing as it was in the previous one. Even if you have played the lottery for a long time, your chances of winning don’t get any better.
Many lottery winners end up broke shortly after winning, largely because they do not understand financial basics and do not know how to manage their money. This is a common problem among gamblers and other people who mismanage their wealth.
In addition to encouraging irrational gambling behavior, state lotteries also skew demographic data and discourage economic mobility. Several studies have found that the majority of lottery players and lottery revenues are drawn from middle-income neighborhoods, while fewer people play in low-income communities. This skewing of demographic data, coupled with the fact that lottery revenues are a small share of state budgets, undermines the public’s sense that lotteries serve a social purpose. Instead, state governments should focus on expanding other means of raising revenue for public purposes. This would reduce the addictive nature of lottery gambling while allowing them to meet their fiscal obligations.