Is the Lottery a Good Idea?
The lottery is a popular form of gambling, and it contributes billions to state budgets every year. But is it a good idea? It depends on whether you consider the utility of non-monetary gain to be greater than the disutility of monetary loss. The answer is not clear-cut, and the consequences of lottery play are complex.
The practice of distributing property or wealth by lot has a long history, going back at least to biblical times, although the casting of lots for material gain is much more recent. The first known public lotteries with money prizes were held in the Low Countries in the 15th century, when towns raised funds for town fortifications and to help the poor.
Since the early days of American history, lotteries have played an important role in the founding of colonies and in funding various projects. In colonial era America, for example, lotteries helped finance the building of Harvard and Yale. Lottery revenues also paid for the construction of roads, bridges and wharves. George Washington himself sponsored a lottery in 1768 to raise funds to build a road across the Blue Ridge Mountains.
Today, the lottery is a widespread and lucrative industry that has developed extensive constituencies including convenience store operators (whose customers tend to buy lotto tickets); lottery suppliers (who frequently make heavy contributions to state political campaigns); teachers (in states where lottery revenue is earmarked for education); and state legislators (who are quick to become accustomed to regular infusions of cash).
People have a basic misunderstanding about how rare it is to win the big prize in the major lotteries. This works in the lotteries’ favor, because people want to dream about winning huge sums of money. Humans are very good at developing an intuitive sense about how likely risks and rewards are in their own lives, but those skills don’t translate well to the grand scope of lottery jackpots.
In addition, people’s basic misunderstanding about how much money they can win in the big lotteries is misleading, because it is not based on their actual odds of winning. The big lottery jackpots are advertised as a percentage of the total amount sold, but that percentage is actually a figure calculated after taking into account all costs involved in running the lottery.
In other words, the “prize pool” is actually the amount left over after paying prizes, the profits for the lottery promoters, and any taxes or other fees. The percentages given to participants and to the state are then calculated from that. The state uses its share for whatever it likes, but most put some of it into a special fund for potential budget shortfalls. In addition, the lotteries are also promoting new games such as video poker and keno, which may not be such good ideas for society. They are promoting the illusion that they are helping to save children and other worthy causes, when the real problem is that these games will actually cost taxpayers more money over time.