The Benefits of Lottery Spending

Lotteries are a popular form of gaming in which people are drawn to win a prize by chance. The practice is ancient—the Old Testament instructs Moses to take a census and distribute land by lot, while the Roman emperors used lotteries to give away property and slaves. But, as a government-sponsored form of gambling, lottery prizes are usually cash or other goods rather than land. The earliest recorded use of a drawing of lots for prizes in Europe was during the Roman Saturnalian parties: the host distributed tickets to guests and held a raffle at the end of the evening to give away fancy items such as dinnerware.

The first European public lotteries offering money prizes grew out of this type of entertainment, and they became increasingly common in the fifteenth century. The oldest known public lottery, a “ventura,” was organized by the city of Modena under the auspices of the ruling d’Este family in 1476.

Privately organized lotteries also grew in popularity. In the early Americas, they helped finance everything from churches to highways to the Revolutionary War, despite Protestant prohibitions against gambling and other forms of risk-taking. The Continental Congress even voted to establish a lottery to help pay for the rebellion, although that plan was ultimately abandoned. Lotteries became especially popular in the United States as governments sought solutions to budgetary crises that wouldn’t rouse an increasingly tax-averse populace.

As the figure above shows, the odds of winning a lottery jackpot are extremely low—the number of tickets sold must be very large to produce a high payoff. And the prize amount is often much less than the total cost of operating a lottery. In fact, the profits from a lottery are more often used to cover promotional costs than as a source of revenue.

Cohen writes that state lottery commissions aren’t above availing themselves of psychology and leveraging addictive design to keep ticket buyers coming back for more. For example, the design of the front of a lottery ticket is meant to trigger a “primal craving for wealth” and a “desire to see something new.” To further increase sales, state lottery promotions are heavily promoted in neighborhoods that are disproportionately poor, Black, or Latino.

Critics of lottery spending sometimes cast the games as a “tax on the stupid,” but Cohen argues that this argument is flawed. For one thing, the lottery is responsive to economic fluctuations: lottery sales tend to rise as incomes fall, unemployment grows, and poverty rates increase. Moreover, the same logic that makes it impossible to predict whether or when someone will become rich applies to all commercial products—and there’s nothing inherently wrong with that, as long as people are informed about the odds of winning. In the end, the lottery is just another tool for distributing wealth and, in many cases, the most effective means for doing so. The ad campaign for the Powerball jackpot was estimated to cost $600 million, or about two-thirds of the jackpot itself.