Public Policy and the Lottery


A lottery is an arrangement in which people draw lots to determine prizes based on chance. The casting of lots for decisions and determining fates has a long history, including several instances in the Bible, but lotteries offering material rewards are considerably more recent. The first recorded public lottery was held during the reign of Augustus Caesar for municipal repairs in Rome, and the first known to distribute prize money was a 1466 drawing at Bruges, Belgium, supposedly for aid to the poor. Privately organized lotteries were common in Europe in the 1500s, and by the 1700s they had become widely popular in America, where Benjamin Franklin sponsored an unsuccessful lottery during the American Revolution and Thomas Jefferson was reported to have organized a lottery for the relief of his debts.

State governments began to adopt lotteries in the immediate post-World War II period as a way to increase public services without increasing taxes on middle-class and low-income residents. But despite the claims of advocates, lotteries are not just a way to increase government spending; they also have important regressive effects on lower-income populations and may contribute to problems such as compulsive gambling and problem addiction.

Although the structure of a lottery varies greatly, most national lotteries share certain elements. The most important is a system for collecting and pooling all of the money that people place as stakes. This is often done by passing tickets through a hierarchy of sales agents until they reach the lottery headquarters, where the amounts are “banked.” The total value of prizes is usually calculated after expenses—including profits for the promoter and other costs of promotion—and any taxes or other revenues have been deducted from the pool.

As the number of states with lotteries has increased in recent decades, there have been growing concerns over the social impact and fairness of these institutions. Many of these concerns have centered on the regressive nature of lotteries and the fact that they are not well regulated. In particular, studies have shown that lottery participation is disproportionately higher among lower-income communities and among those with less education.

While there is no single answer to these questions, it is clear that a major issue is the role of public policy in this area. State officials typically adopt lottery policies piecemeal and incrementally, with little or no general overview. As a result, they tend to make decisions at cross-purposes to the overall welfare of the population. And, since lotteries are inherently businesses focused on maximizing revenues, they have incentives to promote gambling and attract the maximum number of customers. This can lead to negative consequences for poor people and problem gamblers, as well as other groups in society. However, it is unlikely that these issues can be resolved by legislative or executive action alone. Instead, a fundamental change in the culture of state lottery agencies is needed. A new emphasis on public welfare is required. To do so, lottery officials must learn to listen to their constituents and focus on the needs of the most vulnerable in our society.