The Hidden Problems of the Lottery


The lottery is a fixture of modern life. Americans spend over $100 billion on it annually, making it the most popular form of gambling in the country. But despite its widespread popularity, the lottery doesn’t necessarily raise much money for states. In fact, it’s a pretty inefficient way to collect taxes. And it can also do real harm to people’s financial well-being.

The word lottery probably derives from the Dutch word lot, meaning fate or fortune, which may be a calque on Middle French loterie “action of drawing lots”. The first state-sponsored lotteries were held in the Low Countries in the 15th century for raising funds for town fortifications and to help the poor. Many of the world’s best universities owe their existence to lotteries as well. Lotteries helped build the original campuses of Harvard, Yale, and Dartmouth, as well as Columbia University in New York City.

Lotteries are a pretty easy way to take advantage of human biases. The most obvious is the way they make it easy to buy a ticket without thinking about the cost or probability of winning. But there are more subtle ways to manipulate the system. For example, people tend to prefer numbers that are more common. So a savvy lottery operator will sell tickets with numbers that are less common, thereby increasing the number of winners and decreasing the overall prize amount.

Another problem is that most people don’t realize how little they actually win when they do win. The average prize is only about a thousand dollars, which isn’t a whole lot of money. And the odds of winning are extremely long, even for the highest jackpots.

Finally, there’s the way lottery prizes are advertised. The lion’s share of the publicity for the lottery is focused on the massive jackpots. This gives the impression that winning is a possibility for everybody, which isn’t true. The overwhelming majority of jackpots are won by people in the top quintile of incomes, who have enough discretionary income to play the lottery.

It’s a bit more complicated for the bottom quintile, which is why the lottery is so often seen as regressive. The bottom quintile has very little disposable income to spend on something that might not bring them a big reward.

The big message from lotteries is that they’re good because they raise money for states. But it’s important to put that revenue in context of total state revenue. It’s a drop in the bucket, and it comes at the expense of those who lose money on the tickets.