The State Lottery

While the casting of lots to determine fates or the allocation of property has a long history (with several examples in the Bible), state-sponsored lotteries are comparatively recent. They emerged in the immediate post-World War II period, when states wanted to expand their array of services without increasing taxes on their middle- and working classes. Lotteries seemed to offer an easy way to raise money without incurring the political pain that would come with raising taxes.

The principal argument used in every state that adopted a lottery has focused on its value as a source of “painless” revenue: players voluntarily spend their money for the benefit of public goods. This has obscured the reality that lotteries are a form of hidden tax on low-income people who buy most of the tickets. It has also obscured the fact that, despite the purported entertainment value of the game, it is essentially a zero-sum game, with each ticket purchased by a player subtracting one unit of utility from his or her total wealth.

Historically, many states started their lotteries by legitimizing a monopoly for themselves and then establishing a state agency or corporation to run the games (as opposed to licensing a private firm in return for a portion of the proceeds). The initial operations of a new lottery are generally modest in scope, but revenues typically grow rapidly. As the operation becomes established, it inevitably faces pressure to maintain or increase revenues and tries to do so by adding more complex and exciting games.

This constant quest for more and more games, of course, can lead to boredom and apathy among the players and ultimately results in declining revenues. This is why lottery officials are constantly promoting new games and offering bigger and better prizes, trying to keep the interest of players alive.

A few states, such as Alabama, Utah, Alaska, and Mississippi, do not operate state lotteries. The reasons for this are varied. In Mississippi and Nevada, where gambling is legal, the state government already gets a share of the lottery revenue and doesn’t want to lose its revenue base; in Alaska, where oil drilling has been booming, the lottery might have a negative impact on the economy; and in Alabama and Utah, where religious concerns are paramount, the state governments haven’t felt the need for extra revenue.

The rest of the states are, of course, fully committed to the lottery. Billboards urging motorists to buy tickets line the highways, and television commercials tout huge jackpots for Powerball and Mega Millions. The messages are designed to make the lottery seem fun and zany, insinuating that it is okay to risk a small amount of money for a chance at instant riches, because the experience will be entertaining. This is a strategy that will likely fail to prevent the lottery from becoming a massively regressive form of gambling, but it has certainly helped to obscure the fact that the lottery is just another form of state-sponsored hidden tax on poor people.