Public Policy and the Lottery

In the United States, lotteries are a major part of public finance, raising funds for schools, hospitals, and a variety of other public works projects. Until the 1960s, they were also used as a painless way for state governments to increase their budgets and expand their array of social programs without having to raise taxes on the working class. But that arrangement was built on a shifting foundation, and today’s lottery is facing increasing criticism from a wide range of critics. These concerns include problems with compulsive gambling, a possible regressive impact on lower-income groups, and broader issues of public policy.

The casting of lots for determining ownership and other rights has a long record in human history, with examples cited in the Bible. More recently, the casting of lots has been used for material gains as well: since the 1970s, there have been a multitude of state and national lotteries that offer prizes in the form of money or goods.

These lotteries differ widely in their structures and operations, but most share certain common features. They start with a mechanism for collecting and pooling all stakes placed, and a mechanism for disbursing the prize winnings to winners. A portion of the total pool must be deducted for organizational costs and profits, and a further portion normally goes to the state or sponsor. The remaining pool is then used for the advertised prizes.

Lottery revenues often rise dramatically after the introduction of a new game, but then tend to level off and even decline. To maintain or increase revenues, a state must introduce new games or other incentives to attract players. In the past, most state lotteries were based on traditional raffles, in which people bought tickets to be entered into a drawing at some future date, often weeks or months out. But innovations in the 1970s led to a rapid expansion of the industry, including the development of instant games, such as scratch-off tickets, that have a much shorter timeframe for entering the draw and higher odds of winning.

Another characteristic of most modern lotteries is the use of a variety of marketing tools to promote and publicize the game. Typical methods of promotion include television and radio commercials, billboards, and the Internet. The latter has been a particularly powerful tool for lottery marketers, allowing them to reach a broad audience with relatively small expenses. In addition, online promotions have helped to broaden the reach of the game to places where it might otherwise be unavailable. The result is that in many states, lottery advertising is a significant portion of the total media spend on advertising. This trend is likely to continue, as the popularity of online gambling increases. A key factor is the growing availability of high speed Internet connections. This has allowed for the emergence of lottery websites, where people can play from home rather than visiting a physical store. In the future, more states will likely adopt similar models for promoting and running their own lotteries.