Public Policy and the Lottery

A lottery is a game in which numbered tickets are sold and prizes are given to the holders of numbers drawn at random, often as a means of raising money for public benefit. It is one of the most popular forms of gambling and has been used in a wide variety of decision-making situations, from sports team drafts to the allocation of scarce medical treatment. The ubiquity of lotteries has given rise to an enormous industry, which generates billions of dollars annually. It also raises several important questions about the ability of government at any level to manage an activity from which it profits, especially in an era of anti-tax politics and increasing reliance on “painless” revenue sources.

A defining feature of the lottery is that it is inherently risky for participants, both in terms of the chance of winning and the potential loss of a large sum of money. However, for many people the entertainment value and/or other non-monetary benefits obtained by playing the lottery exceed the disutility of a monetary loss. In this case, the purchase of a lottery ticket can be a rational choice for that individual.

Most of the money outside winnings ends up going back to participating states, who have complete control over how they use it. The state of Minnesota, for example, puts 25% of lottery funds into a trust fund dedicated to water quality and wildlife regulations. Other states have devoted lottery revenues to things like roadwork, bridge work and police forces. And still others have used it to fund support centers for compulsive gamblers and groups devoted to recovery.

It is not surprising, then, that many of the same issues that plague public policy in general are brought to bear on the lottery: concerns about its effects on compulsive gamblers, the regressive nature of lottery proceeds and its effect on low-income populations. These are not, in fact, problems inherent in the lottery itself but rather in the way that governments at any level manage an activity from which they profit.

The term lottery derives from the Dutch word for “draft” or “drawing lots,” and is thought to have been borrowed from Middle French loterie, a calque on Old English lootinge (“lottery”). It was first recorded in print in 1569, but advertisements using the word had been appearing two years earlier. A number of other languages have adopted the word, and it is sometimes used as a synonym for betting or gambling. It is, therefore, a surprisingly universal word.