As Americans spend billions on lottery tickets every year, state politicians promote the games as a way to raise revenue without raising taxes. But just how meaningful that revenue is in broader state budgets and whether it’s worth the trade-off to people who lose money on a ticket is up for debate. And there are a lot of other questions about the nature of lottery gambling that deserve more attention.
In the eighteenth and nineteenth centuries, as the United States’ banking and taxation systems were still evolving, lotteries served an important role in the early days of the nation. They helped finance everything from paving streets to building schools and even building the first American colleges, including Harvard and Yale. Lottery games were popular with prominent figures like thomas jefferson and benjamin franklin, who used them to retire their debts and buy cannons for Philadelphia.
Today, state lotteries continue to thrive. As of last year, American players spent upwards of $100 billion on tickets. And though many play for fun, others use it to get out of poverty or to keep up with the Joneses, buying into a meritocratic belief that they’ll be rich someday if they just buy enough tickets and have enough luck.
Lotteries operate on the principle that, as with most human activities, people tend to over-estimate their chances of success. To compensate, they offer a much higher prize to the winning player than the value of any goods or services that could be obtained by purchasing those tickets. Moreover, the odds of winning are usually stated in a misleading fashion to give the false impression that the chance of winning is higher than it actually is.
Despite these problems, it’s hard for many people to resist the lure of a big jackpot. Especially in the age of inequality and limited social mobility, lottery advertising presents winners with an unattainable promise of instant riches. In this sense, they are acting at cross-purposes with the greater public interest.
Considering that state lotteries are run as businesses with a primary goal of maximizing revenues, their advertising necessarily centers on encouraging people to spend their money on a game with such a low probability of success. But this marketing campaign obscures the true cost of the lottery for poor people, problem gamblers, and anyone else who is not in a position to afford such high-risk gambling. In this sense, the lottery is a form of regressive taxation that benefits the wealthy while penalizing the poor and those who are not in a position to afford it.