The casting of lots to determine fates and property rights has a long record in human history, including several instances in the Bible. Its use for material gain, however, is relatively recent. The first recorded public lottery took place during the reign of Augustus Caesar for municipal repairs in Rome; the first to distribute prize money, on the other hand, was held in 1466 in Bruges in what is now Belgium, for a charity fund. Since that time, state governments have established lotteries to raise funds for various purposes. Today, almost all states and the District of Columbia run lotteries with a variety of games, from traditional draws like Powerball to instant-win scratch-off tickets. They are a source of billions in revenue each year.
Despite Protestant proscriptions against gambling, lottery games played an important role in colonial America. They financed private ventures as well as public works, such as roads, bridges, and canals, and helped pay for the construction of Harvard and Yale. They also enabled the colonies to compete with the British for lucrative business and military contracts, as well as for foreign investment.
In modern times, however, the popularity of lotteries has grown primarily in response to the state’s need for additional revenues, particularly during periods of economic stress. Advocates of legalization argue that a lottery is a painless way for the state to increase spending, as the proceeds are drawn from those who voluntarily choose to participate and can be used for a specific line item in the budget, invariably education but sometimes other services as well, such as senior care or aid for veterans.
But the evidence suggests that such claims are often overstated. While it is true that a lottery can generate large sums of money quickly, the growth of revenue typically plateaus and may even decline as players lose interest. Then, to rekindle interest, the lottery must offer new games that appeal to the public’s sense of novelty and excitement.
Until recently, most state lotteries operated along similar lines: a legislature legitimises the monopoly; establishes a public agency or corporation to run the lottery (as opposed to licensing a private company in return for a share of the profits); begins operations with a modest number of simple games; and then, under constant pressure to maintain and grow revenues, progressively adds new games.
The result is a game that has many of the same problems as any other form of gambling. For example, players make irrational choices when they purchase tickets that have expected values lower than the cost of entry. The same irrationality exists when people buy lottery tickets that promise them big prizes for a small amount of money. In fact, the lottery’s biggest problem is that it is not as good a deal as simply paying participants, because the extra steps involved in the lottery make it more complex and therefore less efficient. In the end, Cohen argues, this makes it more difficult to sustain the lottery as an alternative to raising taxes or cutting services.