The Lottery and Its Ugly Underbelly

The drawing of lots to determine ownership or other rights has a long record in human history, including many instances in the Bible. More recently, the lottery has become a popular method of raising funds for towns, wars, colleges, and public-works projects. While the practice may seem harmless enough, it does have its ugly underbelly. When you buy a ticket to the lottery, you’re not investing your life savings—you’re purchasing a fantasy, the dream that one day you’ll stand on a stage with an oversized check for millions of dollars. While the odds are extremely high that you won’t win, most people don’t buy tickets because they’re compulsive gamblers; they do so with the hope that they might one day find themselves in this position.

The lottery’s popularity as a revenue-raising tool has been fuelled by the belief that it provides “painless” taxes—that is, state governments can use it to raise money without increasing taxes on middle-class and working class residents. When the lottery began to grow rapidly in the Northeast during the immediate post-World War II period, this dynamic was particularly pronounced: state governments wanted to expand their array of services but couldn’t do so by imposing especially heavy taxes on the working class and middle class.

To qualify as a lottery, a competition must involve a pool of prizes with a prize-to-ticket ratio that is not too large. There must also be a way for bettors to know what their chances of winning are, and a percentage of the pool must go toward costs associated with organizing the lottery and promoting it.

In some cases, lottery participants pay a nominal fee to enter a competition, then receive a numbered receipt that can be used to claim a prize if they match the numbers that are drawn. In other cases, the bettor’s name and number(s) are written on a piece of paper that is placed in a pool for later shuffling and selection. A number of lotteries also sell a variety of fractional tickets, such as tenths of a ticket; these cost slightly more than the whole ticket but have a higher chance of winning than the single-ticket winner.

Although the lottery’s popularity among the general population is surprisingly broad, it develops specific constituencies: convenience store operators (who get regular orders for tickets); suppliers of prizes, such as scratch-off games; teachers (in states in which lottery revenues are earmarked for education); and state legislators, who become accustomed to the extra cash flow. In addition, the lottery has developed a thriving black market for its tickets, which are widely sold in street markets and on the Internet. These lotteries violate federal and international anti-money laundering laws. Nevertheless, they are very profitable for the lottery industry, which is why governments have been reluctant to curb their operations.