As the debate about gambling rages, state governments are increasingly turning to lotteries for revenues. Unlike traditional taxes, lottery proceeds are relatively easy to collect and can be targeted for specific purposes. Nevertheless, critics of lotteries focus on the problem of compulsive gamblers and the regressive impact on lower-income neighborhoods. But these criticisms miss the big picture. The truth is that, once states adopt a lottery, it is hard to get rid of.
The first recorded lotteries offering tickets with prizes in the form of money were held in the Low Countries during the 15th century, to raise funds for town walls and fortifications. Those early lotteries were not much more than traditional raffles: people bought tickets and the winning ticket was drawn at some future date, often weeks or months away. Over time, however, lottery games became progressively more complex and innovative. In the process, they tapped into deep-seated psychological motivations to risk for a chance at a large amount of money.
Since New Hampshire launched the modern era of state lotteries in 1964, virtually every state has adopted a game. They have been a very effective alternative to raising taxes, and they have also become highly popular with the general public. In fact, most Americans play the lottery at least once a year. As a result, they have developed extensive and powerful specific constituencies: convenience store operators (who usually serve as lottery vendors); lottery suppliers (heavy contributions to state political campaigns by these groups are regularly reported); teachers (in those states in which lottery revenues are earmarked for education); and even state legislators, who quickly grow accustomed to the additional income from lotteries.
Despite the widespread popularity of the lottery, many people remain convinced that it is an unregulated activity with serious problems. Some critics argue that lottery advertising misrepresents the odds of winning, while others claim that lottery players use quote-unquote systems that are irrational and unsupported by statistical reasoning—they buy tickets at lucky stores, choose their numbers according to birthdays or anniversaries, and seek out special times to purchase their tickets.
In fact, a number of research studies have shown that, on average, people who play the lottery spend more than they can afford to lose. Moreover, there are plenty of examples of lottery winners who end up worse off than they were before their wins.
In addition, some people believe that a lottery is a hidden tax, and that it is unfair to taxpayers for states to use a lottery to fund the same programs that could be funded through direct taxes. But the evidence shows that lottery revenues are generally a small share of state spending. And there are ways for states to increase the benefits they provide to taxpayers without reducing the size of the jackpots. For example, by increasing the proportion of prize money that is paid out in an annuity, the total value of a jackpot can be substantially increased while retaining a high probability of winning.