During the last two decades, state lotteries have become a major source of public revenue. They generate more than $100 billion in ticket sales each year and have proven to be an especially popular form of gambling. In many states, the money is earmarked for education. But is promoting lottery games an appropriate function for governments? What about the impact on compulsive gamblers, the regressive nature of the revenues, and other factors?
The history of lotteries is complicated and varied. The earliest forms of lotteries, in which prizes were goods or services rather than cash, date to ancient times. The Old Testament has several passages referring to distribution of land and slaves by lot; Roman emperors used lotteries for gifts during Saturnalian festivities. By the time of the Revolutionary War, the Continental Congress used lotteries to raise funds for the war effort. Alexander Hamilton was among those who argued that lotteries could be an effective means of raising money and reducing taxes.
Modern lotteries fall into two broad categories, those that involve a consideration (money or property) for the chance of receiving a prize and those that do not. In the latter category are military conscription and commercial promotions in which the winner is selected by a random procedure.
Most modern state-run lotteries, including the one that operates in New Hampshire, are of this latter type. The basic dynamic of state lottery policy is that voters are eager to support more government spending and politicians view the lottery as a relatively painless source of funds for this purpose.
When states introduce a lottery, they generally legislate a monopoly for themselves; create an independent agency or public corporation to run the lottery (as opposed to licensing private firms in return for a cut of the profits); begin operations with a small number of simple games; and then, due to constant pressure for additional revenues, progressively expand the portfolio of available games.
Lottery advertising is aimed primarily at persuading people to spend money on tickets. It emphasizes that the prizes are significant and that playing is fun. This is meant to counter the perception that lotteries are, in fact, a form of taxation.
Lottery marketing also seeks to reassure the public that the proceeds are being spent for a good cause. This is a powerful argument in times of fiscal stress when citizens are willing to forgo other taxes to support the state’s social safety net. But it is not without its problems. For example, research shows that lottery participation varies by income levels and other socio-economic characteristics. Men play more than women; blacks and Hispanics play less than whites; and the young and elderly tend to play less than those in middle age. In the end, though, most lottery players are aware that their chances of winning are slim. In the rare event that they do win, they are often unable to cope with the stress of such a huge sum of money and wind up broke within a few years.