Public Interest and the Lottery

The lottery is a popular way for state governments to raise money. Supporters argue that it is a painless way to generate revenue, and that the profits are spent on public goods such as education. Critics, however, claim that the profits are used for other purposes, and that lotteries promote addictive gambling behavior, impose large regressive taxes on low-income groups, and encourage illegal gambling.

In the 17th century it was common in the Netherlands for towns to organize lotteries to raise money for a variety of public uses, from providing food for the poor to paying for town fortifications. Despite these criticisms, lotteries continue to grow in popularity, as illustrated by the fact that the largest prize amounts, often tens of millions of dollars, are promoted on newscasts and websites. In addition, new games are introduced to keep up this momentum.

For the individual, a ticket purchase may represent a rational decision if the entertainment value (or other non-monetary benefit) is high enough to outweigh the disutility of losing. But for the nation, which subsidizes the ticket purchases of many of its citizens, the question is whether these activities are consistent with the public interest.

Historically, state lotteries have been little more than traditional raffles, where the public buys tickets for a future drawing. But innovations in the 1970s changed the industry dramatically, allowing for smaller prizes, shorter time periods between draws, and higher odds of winning. Moreover, the reliance of states on lottery revenues makes it difficult to maintain a balance between the need to increase those revenues and the state’s duty to protect its citizens from addictive and harmful gambling behavior.