The Lottery and Governments
The lottery is an activity in which people buy chances to win a prize, such as cash or goods. The prizes are usually awarded by drawing numbers, though other methods can be used. Lotteries are popular in many countries. Some governments regulate the industry, while others endorse it and provide funding. Most modern lotteries are based on the principle of random selection.
Lotteries have been around for thousands of years, but they were not widely used until the modern era. In the 15th and 16th centuries, towns in Burgundy and Flanders used them to raise money to fortify their defenses and help the poor. Francis I of France permitted the first public lotteries with money prizes to be held in several cities.
In the United States, state legislatures grant themselves the exclusive right to operate a lottery. As a result, most state lotteries are considered monopolies and do not allow other commercial lotteries to compete with them. Most states use the profits from the lotteries to fund various government programs.
During the immediate post-World War II period, some states saw lotteries as a way to increase their revenue without raising taxes on the working class. They believed that, by encouraging widespread media coverage of lottery winners, they would create the impression that winning a jackpot was commonplace and that citizens were being helped by their governments through the sale of lotto tickets.
While the majority of respondents in the NORC survey favored lottery participation, they were not particularly rosy about the payout and win rates. Most (63%) thought that, on average, the lottery paid out less than 25% of total sales as prizes. And fewer than one in five (22%) thought they had ever made money playing the lottery.
Some state lawmakers viewed the money that the lottery raised as a necessary and important source of income to fund social safety nets, such as education and health care. In addition, they thought that it was a way to boost business revenues for small businesses that sold tickets and larger companies that provided merchandising services and advertising or computer services to the lottery.
Many lottery advocates argue that buying a ticket is a civic duty, similar to paying taxes. However, few state governments actually spend the vast amounts of money they receive from lottery ticket sales. During 2003, nine states reported lottery sales declines.
While the purchase of a lottery ticket cannot be accounted for by decision models that incorporate expected value maximization, it may be explained by utility functions based on things other than the lottery outcome. In particular, the lottery may provide some purchasers with a sense of excitement and the opportunity to indulge in fantasies about becoming wealthy. This is especially true for low-income households. In fact, lottery purchasing is higher in states with lower per capita household incomes. It is also higher among African-Americans.