Public Policy and the Lottery
The lottery is a game of chance in which numbered tickets are sold and prizes awarded to those whose numbers are drawn at random. It is sometimes used to raise funds for public or private projects. It is one of the oldest forms of gambling and has been used for centuries to determine ownership, rights, and privileges. The drawing of lots to decide these issues has been documented in ancient documents and is a familiar practice from many cultures.
In modern times, lottery games are typically run by state governments and have broad public support. Their popularity owes partly to the fact that the proceeds are earmarked for a specific public purpose such as education. But these arguments mask a deeper problem: Lotteries depend on large numbers of low-income participants and produce unintended negative consequences.
Most people have fantasized about what they would do if they won the lottery. Some envision spending sprees, exotic vacations, and luxury cars. Others dream of putting the money into investments or paying off mortgages and student loans. The fact is, though, that winning the lottery doesn’t guarantee financial security; it’s a game of chance with high stakes and little skill.
While most lottery players are not compulsive gamblers, the recurring purchase of tickets can represent a costly habit that may undermine other long-term savings goals such as retirement or college tuition. State officials, therefore, must decide how best to balance the benefits of promoting gambling with the need to keep lottery revenues stable and manageable.
Despite the widespread perception of lotteries as government enterprises, they are actually privately run businesses that have become highly profitable and a major source of state revenue. Their operations are also subject to considerable political pressures, including from convenience store operators (the favored lottery vendors); suppliers of services and equipment (heavy contributions to state political campaigns by these firms are often reported); teachers (in states that earmark lottery proceeds for their schools) and other interested groups.
The development of a state lottery is often a classic case of the making of public policy piecemeal and incrementally, with little overall consideration of the impact on the general population. Once a lottery is established, its policies and operation are hard to change, and public officials frequently find themselves at cross-purposes with the industry’s evolution.
Moreover, the public acceptance of state lotteries is often independent of the actual fiscal condition of the governing body. As the economist Clotfelter and Cook report, lottery proponents frequently claim that the proceeds benefit a particular “public good”—and this argument is a powerful one in a society with limited taxation options. However, studies suggest that the poor participate in lotteries at rates far lower than their percentage of the population and that lottery revenues are disproportionately received by middle-income neighborhoods. This makes them a source of regressive income inequality, even when they are conducted by publicly funded entities such as state governments.