Public Policy and the Lottery

The lottery is a big business. Americans spend upward of $100 billion on tickets each year. It is, by any measure, the most popular form of gambling in the country. It also raises significant state revenues. But that’s not necessarily a good thing.

State lotteries are a long-standing feature of American life. They have a number of important effects on society, including increasing inequality and the social mobility of the poor, but they have also been associated with problems of public policy. The main argument used to justify the existence of lotteries is that they provide “painless” revenue, in which the public voluntarily spends money that otherwise would have gone to a state tax, with the proceeds being directed to a public good. This argument seems especially attractive in times of economic stress, when voters are averse to paying taxes and when politicians might be reluctant to cut public spending. But studies show that the popularity of lotteries is not strongly correlated with a state’s actual financial condition.

In the US, many state lotteries function largely as traditional raffles. The public buys tickets for a drawing held in the future, typically weeks or even months away. As a result, state revenues often rise dramatically in the first few years of operation. But after a while, the excitement wears off, and revenues may begin to decline. To maintain the momentum, a lottery must continually introduce new games to keep ticket sales up. This tends to reduce the proportion of sales that goes into prize funds, and thus the amount of money available for general state use, such as education.