Why Should a State Run a Lottery?
The lottery is a type of gambling in which numbers are drawn to determine the winners of a prize. It is one of the most popular forms of gambling, with Americans spending over $80 billion a year on it. Some people play the lottery because they enjoy the experience of buying a ticket and waiting to see if they will win. Others buy tickets to meet their financial obligations, such as paying off credit card debt. Still others, especially those with low incomes, use the money to save for emergencies.
Regardless of their motivations, people make decisions about lottery purchases using a variety of heuristics and models. Behavioral economists have developed a number of heuristics that can be used to evaluate the likelihood of winning and the expected utility of the purchase. These heuristics are not foolproof, however, and they can be biased by factors such as the person’s previous experiences with the lottery, the frequency of their playing, and the size of their winnings.
In addition to the standard heuristics, people may also be influenced by the arousal they receive from the prospect of winning and the relative magnitude of the prize (i.e., the jackpot). These effects are important in explaining why people continue to play even after they have won large sums of money. The arousal effect is particularly strong when the jackpot is large, and this can lead to lottery-induced addictions.
Lotteries have become a major source of state revenue, and the state governments that run them are constantly under pressure to increase their profits. In this context, it is worth considering whether a state government should be running a lottery in the first place.
While the casting of lots for various purposes has a long history, and some states used it in early colonial times for municipal repairs, lotteries as a means of distributing prizes for material gain are of more recent origin. The first recorded public lottery to distribute money was held in Bruges, Belgium, in 1466 for the purpose of providing assistance to the poor.
In the modern era, the process of establishing a state lottery usually follows a similar path: The state establishes a monopoly for itself; creates a state agency or public corporation to run the lottery (as opposed to licensing a private firm in return for a share of the profits); begins operations with a modest number of relatively simple games; and, due to constant pressure to raise revenues, gradually expands its offerings in terms of games and prizes.
State officials often promote lotteries with the argument that they offer a “painless” source of revenue. But the reliance on such revenues can place lotteries at cross-purposes with the general public interest. The same applies to other forms of government-sponsored gambling, such as casinos and horse races.
