Is the Lottery Worth the Risk?


People are spending upward of $100 billion a year on lottery tickets. It is, by far, the most popular form of gambling in America. But just how meaningful that revenue is, and whether it’s worth the trade-off to those who lose money, is open to serious debate. Lotteries have a long history in the United States. Their earliest origins come from Europe, where they were a staple of municipal finance. But state governments grew increasingly reliant on them in the decades after World War II, when a swelling population and rising inflation combined to create budget crises that threatened vital services. To balance their books, states had to raise taxes or cut services, which was deeply unpopular with voters. Lotteries offered a middle ground: they would generate revenue without inflaming voters’ anger or jeopardizing the safety net.

As the name suggests, lottery games involve drawing a slip of paper with a number printed on it to win some prize money. Unlike conventional gambling, in which the odds of winning are clearly stated, a lottery has a hidden or obscured probability of success; the only way to know how likely you are to win is to participate.

The popularity of lottery-style games in the United States, and elsewhere in the world, has prompted growing concern over how they affect people. Lottery critics argue that the games are addictive and exploitative of poorer players, who are less able to control their spending habits. They also point to studies showing that lottery participants tend to have lower incomes and higher levels of poverty and unemployment. Finally, they say, the industry is regressive in its impact on minority communities.

Yet defenders of the lottery point to their success at generating revenues without increasing taxes or cutting public programs. They also point to the long tradition of lottery games in Europe, and the American colonies. They note that the early colonies held regular lotteries to fund public projects, including supplying a battery of guns for the American Revolution, building Harvard and Dartmouth, and rebuilding Faneuil Hall.

The history of the lottery is complicated, but Cohen’s essay concentrates on its modern incarnation. He argues that the modern lottery evolved in the 1960s, when awareness of all the money to be made in gambling coincided with a crisis in state finances. As the Baby Boomers grew up, states began to expand their array of social safety-net services and find themselves unable to keep pace with ever-increasing costs without raising taxes or reducing services—a combination that was deeply unpopular with the American public.

In response, the lottery industry launched a series of innovations designed to increase sales and profits. These strategies—including presenting ambiguous odds, inflating the value of prizes (lotto jackpots are often paid in a series of equal annual installments over 20 years, with inflation dramatically eroding their current value), and promoting new games—have accelerated the expansion of the modern lottery. It is now a multi-billion-dollar business that operates on the same principles as cigarette and video-game companies.