Lottery is a popular form of gambling that raises billions of dollars each year for state governments. Its supporters promote it as a painless alternative to higher taxes, while opponents describe it as dishonest and unseemly. Both views merit serious consideration.
At the start of the Revolutionary War, the Continental Congress held a lottery to try to raise money for the Colonial army. Alexander Hamilton argued that it would be “more natural for every man to hazard a trifling sum, than for him to hazard a considerable sum, and have little chance of winning much.” Hamilton’s logic was well-founded; lots are a common way to fund public projects, from schools to bridges to government buildings. Public lotteries have a long history in England and the United States, where many were founded by religious groups. Privately organized lotteries have been even more widespread. The earliest American colleges were partly funded by lotteries; Benjamin Franklin even sponsored one to raise money for the purchase of a battery of cannons to defend Philadelphia against the British.
Since the 1970s, state lotteries have grown into enormous enterprises that have become major sources of revenue for the states. In 2002, for example, thirty-nine states reaped $42 billion in lottery revenues. The lottery’s dramatic odds of winning – on the order of one in four – make it an appealing proposition to people with limited resources. It is, in fact, the most popular form of gambling.
But there is more to it than that. Lotteries are also marketing tools, and they use psychology to entice people to spend money they don’t have. They dangle the prospect of instant wealth in an era of growing inequality and limited social mobility. They also appeal to a sense of “keeping up with the Joneses,” a desire to see what others have, and perhaps to steal some of their luster.
Americans spend over $80 Billion a year on lotteries. That is a huge amount of money that could be better spent on building an emergency savings account or paying down credit card debt. It is also a significant amount of money that could be used to help the homeless, the sick and the elderly.
While promoting the lottery as a harmless and easy source of revenue, state politicians often neglect to consider its hidden costs. For example, it is not uncommon for poor people to play the lottery, and it is not unusual for them to lose a substantial portion of their winnings. This is a form of what economists call “regressive taxation,” in which the burden on different taxpayers is not proportional to their income. This can be a significant cost, especially in a period like this when states are struggling with budget deficits and rising inflation. It may be time to rethink the role of the lottery in America. The lottery is no panacea for state finances, and it must be carefully evaluated. Moreover, the moral issues associated with its promotion deserve to be weighed.