Public Goods and the Lottery


The lottery is a form of gambling in which players pay to purchase tickets for a chance to win a prize. The prizes may be money, goods or services. The odds of winning vary according to the number of tickets sold and the size of the prize. Historically, the lottery has been a popular method of raising funds for public projects and charitable endeavors. In colonial era America, for example, it was used to fund construction projects such as roads, wharves and even churches. Today, it continues to be a major source of funding for public and private projects. In the United States, lotteries are regulated by state law and supervised by federal agencies.

In addition to the money won by winning tickets, lotteries also raise money for state government. This money is often used for a broad range of state services including education. However, unlike a regular tax, lottery revenues are not transparent to consumers and thus do not generate the same level of public scrutiny as other state revenue sources. In fact, as Clotfelter and Cook point out, the popularity of lotteries does not seem to correlate with the actual fiscal health of state governments.

Making decisions and determining fates by casting lots has a long history in human culture, as documented in several ancient texts including the Bible. The first recorded public lottery was a draw of numbers in 1466 for municipal repairs in Bruges, Belgium. It is not surprising, then, that state-sponsored lotteries have enjoyed wide public approval as a painless alternative to taxes.

State lottery proceeds are often spent on a variety of public purposes, from helping the poor to building schools. But are these public goods well served by a system in which the vast majority of ticket buyers are likely to be losing money? A recent study by Clotfelter and Cook suggests that a significant percentage of lottery proceeds are wasted on tickets purchased by people who have little hope of winning.

These people are more likely to be from low-income neighborhoods. They are also more likely to buy more than one ticket, which increases their chances of losing more money. The authors conclude that this pattern is a result of the way lottery advertising is structured, with a heavy emphasis on marketing to low-income people.

Whether or not the results of the lottery are fair, it is clear that its promotional tactics are at cross-purposes with the public interest. Given that state-sponsored lotteries are businesses, their advertising necessarily focuses on persuading people to spend their money on tickets. This creates concerns about negative consequences for the poor and problem gamblers, and it calls into question whether a government should be running a business that promotes gambling. Fortunately, newer types of lottery games have sought to address these concerns by providing greater transparency to consumers. Many, but not all, lotteries now publish their prize payout data after the lottery is over. This information is available online and in printed form.