Across America, people spend $80 billion each year on lottery tickets. In a time when many Americans struggle to have enough money to cover basic needs, it is perhaps not surprising that so many are drawn to the fantasy of hitting a jackpot that would change their lives forever. But there is a much better way to use the money in our pockets than buying a ticket. It could be used to create an emergency fund or pay off credit card debt. But instead, most of the money spent on lotteries goes to the state, which gives a very small percentage of winnings back to the winners. It is important to remember that the chance of winning the jackpot is very small, and even if you did win it, there are huge tax implications.
Making decisions and determining fates by the casting of lots has a long history, dating back to biblical times. But the casting of lots for material gain is a more recent development. The first public lottery to award property prizes (rather than slaves or gold) was held in 1466, in Bruges, Belgium, for municipal improvements. By the seventeenth century, the practice had spread to England and the Low Countries. It was a popular dinner entertainment and offered the potential prize of land, money or other goods. It became increasingly common throughout the world, and was adopted by both monarchs and republics, including Thomas Jefferson and Alexander Hamilton.
The principal argument for adopting lotteries has always been that they can provide states with a source of “painless” revenue, based on the idea that players are voluntarily spending their own money and thus don’t feel that they are being taxed. But Cohen’s research suggests that this view of the lottery is flawed. It turns out that lottery revenues have a strong relationship with economic fluctuation. The demand for lottery tickets increases as incomes fall, unemployment rises, and poverty rates increase. And lottery advertising is most heavily concentrated in neighborhoods that are disproportionately poor, Black, or Latino.
Lotteries also enjoy widespread support because they are seen as a way to benefit specific public good, such as education. This argument has proved especially persuasive in times of economic stress, but as Clotfelter and Cook have found, the objective fiscal circumstances of a state do not appear to influence whether or when it adopts one. Rather, it seems that state leaders have adopted lotteries as a way to promote particular projects and to placate voters who want their governments to spend more.