Public Policy and the Lottery

Lottery is a form of gambling in which participants pay small sums of money for a chance to win a larger prize, often administered by state governments. It has a long history and has been used for public purposes, including raising funds to establish the first English colonies in America and funding college buildings at Harvard, Yale, Dartmouth, King’s College, and William and Mary.

It is a popular public policy, and state officials are constantly trying to innovate in order to increase the number of participants and to sustain or grow the prize sizes. The result is that the industry grows and contracts, and state government revenues ebb and flow with changes in popularity and the number of games available.

The lottery industry is also a prime example of public policy evolving piecemeal, and with limited oversight. Few, if any states have a coherent “lottery policy.” Instead, the decision to launch a lottery is made at the local level, with little or no consideration of the overall impact on state government finances or the potential harms to specific groups of people, such as problem gamblers or low-income residents.

Once the lottery has been established, debate and criticism focus on specific features of its operation, such as the potential regressive impact on lower-income households. While this is certainly an important concern, it misses the larger point that state governments have a legal responsibility to promote gambling, and to ensure that its benefits outweigh any adverse consequences.

Most state-run lotteries are structured as traditional raffles, with participants buying tickets to be eligible for a drawing held at some future date, typically weeks or months in the future. However, the introduction of “instant” games in the 1970s transformed the lottery industry, with players purchasing tickets immediately to win a smaller prize. Instant games have lower prizes, but the odds of winning are much higher – usually around one in four. This change in structure has had significant impacts on the amount of money that is raised.

In the United States, there are several state-run lotteries that generate substantial revenue for state government. These large revenues have been used for a variety of programs, from education to law enforcement. Despite their controversial origins, these lotteries have enjoyed broad public support, and the benefits that they have delivered have been deemed worthy of the high degree of public approval they enjoy. Nevertheless, it is worth considering whether the widespread popularity of these lotteries may be misguided. It is clear that, even when the proceeds are used for beneficial purposes, state lotteries raise significant amounts of money that are arguably in excess of the need to provide such services. This excess should be addressed by policymakers and other stakeholders. A number of alternatives exist, from limiting the number of instant games to reducing the prize size and increasing the tax rates on winnings. These measures, along with improved data collection, could help to reduce the risk that state lotteries will divert needed resources from other priorities.