Public Policy and the Lottery

The lottery is a state-controlled form of gambling in which numbered tickets are sold for cash prizes. The games are advertised as a means of helping poor people or funding public services. But the promotion of gambling also raises important ethical questions. Does it encourage problem gamblers and erode social cohesion? And does running a lottery undermine state authority by encouraging citizens to spend their money unwisely?

The first state-sponsored lotteries were introduced in the Low Countries in the 15th century. The origins of the word are uncertain, but it appears to be derived from Middle Dutch loterij or Old Dutch lotterie, meaning “the action of drawing lots.”1

In the United States, all state lotteries are government-run monopolies that bar competition and use profits solely for state programs. The majority of state governments began lotteries in the 1970s (Connecticut, Delaware, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, New Hampshire, New York, Ohio, Rhode Island, Vermont, and Wisconsin) and, as of 2004, forty-eight states and the District of Columbia had active lotteries.

A typical state lottery offers a small number of relatively simple games for a small price, such as a dollar per ticket. The winning prize is usually a substantial sum of money, but the odds of winning are not very good. For example, the odds of matching five out of six numbers in a standard six-number lottery are about 1 in 55,492.

When lotteries were introduced in the United States, they initially enjoyed widespread support from the general population as an alternative to higher taxes or cuts in essential services. Lottery advocates point out that the proceeds of state lotteries are derived from players’ voluntarily spending their money, rather than from taxpayer dollars that may be redirected to other uses. This argument is particularly compelling in periods of economic stress, when voters fear that state governments will cut public services or raise taxes to meet budgetary shortfalls.

As the popularity of state lotteries has increased, their public policy significance has become a subject of debate. Some have argued that the existence of state lotteries is a sign of declining democratic principles, because states are now able to raise large sums of money without requiring a vote by the citizens. Others have argued that the popularity of lotteries is a symptom of an increasing lack of trust in traditional sources of government revenue, such as income taxation.

Whether state lotteries are legitimate public goods is an issue that affects all citizens. As long as states run lotteries, critics will argue that they violate individual liberty and undermine the democratic process. However, if the lottery is justified as a source of state revenues that can be used for essential public goods and services, it should be permitted to continue operating.

In fact, the state of Colorado argues that its lotteries are an important source of revenues for public schools and education. Other states have used their lotteries to fund highway construction and other infrastructure projects, as well as public safety, health, and welfare programs.