Public Interest and Lottery

Lottery is an arrangement in which a prize (often cash) is awarded by drawing lots. Players purchase a ticket and select a group of numbers that are then chosen in a random drawing. If the player’s selected numbers match a second set drawn by lottery officials, the player wins a prize ranging from zero to millions of dollars. Lotteries are generally run as a business with the goal of maximizing revenues, and their advertising strategies reflect this business model. But the question is whether running a lottery is in the public interest. Lotteries promote gambling, and even if the number of compulsive gamblers is small or their regressive impact on lower-income groups is minimal, does this type of state activity serve the larger public interest?

The casting of lots to determine rights and fortunes has a long record in human history. It is documented in the Bible and was practiced in early European societies for raising money for towns, wars, colleges, and public-works projects. The first recorded lotteries that offered tickets for sale and awarded prizes in the form of money were held in the Low Countries in the 15th century. The town records of Bruges, Ghent, and Utrecht indicate that they were used to raise funds for town fortifications and the poor.

Today, 37 states and the District of Columbia operate lotteries. Their popularity has been a constant even during times of economic stress. Their advocates argue that lotteries are a better alternative to tax increases or cuts in government programs and that the proceeds go toward a particular public good, such as education. These arguments are persuasive, and the evidence supports them.

Despite these advantages, lottery critics point to their many downsides. They include the alleged regressive effects on lower-income groups, the lack of a guarantee of an adequate supply of public goods funded by lottery proceeds, and the risk that lottery profits are diverted to private profit. Moreover, they argue that lotteries are often marketed in ways that confuse the true purpose of public funding with a more general desire to buy chance.

In recent years, a few states have rethought their position on lotteries. New Hampshire, for example, introduced its own lottery in 1964, which was so successful that it inspired a dozen other states to follow suit within the next decade. The lottery has proved a popular means of generating revenue without increasing state taxes.

Most state governments allocate lottery proceeds in different ways. Some set aside lottery funds for specific purposes, such as education; others use them to pay administrative costs and vendor expenses. Still others use the money for a combination of these purposes. In most cases, about 50%-60% of lottery ticket sales are paid in prize winnings, while the rest goes to various administrative and vendor expenses, plus to projects designated by the state. The North American Association of State and Provincial Lotteries provides details on how each state spends its lottery revenue.