Is the Lottery an Appropriate Function for Government?
The casting of lots to decide fates or apportion property has a long history in human society. Lotteries have been used to raise money for a variety of purposes, including building walls and town fortifications in the Low Countries in the 15th century and giving assistance to the poor. Modern state-run lotteries are very popular and a significant source of tax revenue. But is this an appropriate function for government at any level, especially in an era when voters are suspicious of taxes?
People who play the lottery pay a small amount of money to have a chance of winning a much larger sum. The odds are bad, but the gamblers persist: I’ve talked to lots of them — people who have been playing for years and who spend $50 or $100 a week on tickets. They are irrational, but they are also clear-eyed about the odds and how the games work.
They know that there’s a strong correlation between ticket purchase and likelihood of winning. They know that there are a few things they can do to improve their chances: buying more tickets, choosing numbers that don’t cluster together and aren’t associated with sentimental values, such as birthdays or home addresses; and staying away from numbers ending in the same digit. They may even use a computer to help them select their numbers.
While the lottery does help support public goods and services, it is not a very efficient way to raise money: of every dollar spent on a lottery ticket, only about 40 percent goes to the actual state government. The rest is consumed by promotional expenses, administrative costs and profits for the lottery promoters. This is a substantial burden on the taxpayer, which is why states must be very careful to manage lottery operations.
Historically, lotteries have been popular with the general public and have helped finance private and public projects, including canals, roads, churches, universities and colleges, libraries, bridges and wharves. In colonial era America, for example, lotteries were an important part of raising money to establish the first English colonies. Benjamin Franklin sponsored a lottery to buy cannons for defense of Philadelphia and George Washington attempted to run one in 1768 to fund his attempt to build the Blue Ridge road.
In the modern era, when state governments sponsor lotteries they usually start by legitimizing a monopoly for themselves; creating an agency to run the operation; starting with a limited number of fairly simple games; and relying on advertising to persuade people to participate. This dynamic creates some troubling tensions. Governments should not be in the business of promoting gambling, which has negative consequences for poor people and problem gamblers.
And in a time when voters are skeptical of taxes, it’s hard to see how the state can justify promoting an activity that they take advantage of for their own profit. So the lesson is that state politicians must be very careful not to become dependent on lottery revenues, which will only make them more resistant to calls for higher taxes and less likely to find alternative sources of funding for essential services.