Lottery, like all forms of gambling, is inherently socially harmful. It distorts individual decision making by creating a false sense of control that leads people to gamble recklessly and irrationally. It disproportionately hurts poorer individuals, and it has a negative impact on society as a whole. State governments have an important role in controlling and managing gambling, but they are often unable to do so effectively. This is due to a number of factors, including the fragmented nature of public policy decision-making in most states. In addition, lottery revenues are often a major source of revenue for state governments, which puts them at risk of becoming dependent on these “painless” revenues in an anti-tax environment.
Historically, lotteries have been a popular means of raising funds for a wide variety of purposes. The first public lotteries were organized in Europe in the 15th century, and records show that towns in the Low Countries held them to raise money for wall construction and town fortifications. In the Americas, Benjamin Franklin promoted a lottery to help pay for cannons to defend Philadelphia during the American Revolution, and private lotteries were common in the colonial era as ways of selling products or property for more money than could be obtained by regular sale.
A modern lottery consists of a drawing for prizes that are usually cash or goods. Those prizes are the remaining value of the pool after the costs of the lottery, profits for the promoter, and taxes or other revenues have been deducted from the total. The prize amount is typically predetermined, and the prize money for each draw is usually quite large.
One of the problems with this approach is that it makes the lottery seem too easy, and obscures the fact that it is not only a form of gambling but also a form of regressive taxation. To avoid this problem, lottery promoters have moved away from the classic message of “you can win!” and are now relying on two messages primarily. The first is that the lottery is a game, and that players should enjoy the experience of scratching off their ticket. This message obscures the regressive nature of the lottery and, in effect, encourages people to gamble recklessly.
The second message is that the lottery is good because it raises money for the state, which is a false and misleading message. In most states, only about half of the money from tickets goes into the prize pot; the rest is earmarked for various administrative and vendor expenses, as well as toward specific projects that each state designates. This arrangement is a classic example of the fragmented nature of public policy, with authority to manage the lottery divided between the legislative and executive branches, and then further subdivided into different categories. The result is that the general welfare of the lottery participants is rarely considered in the context of overall state policy.
Moreover, lottery officials have become dependent on the revenues from the games themselves, and the pressures to increase those revenues are intense. This has created a situation in which lottery officials are often influenced by very special constituencies, including convenience store operators (who benefit from the increased traffic to their stores); lottery suppliers (heavy contributions to state political campaigns are frequently reported); teachers (in states in which lottery revenues are earmarked for education), etc.