The Limits of Lottery Use


A lottery is a gambling arrangement in which people pay a small amount of money to have the opportunity to win a much larger sum of money. The prize for winning the lottery is allocated by a process that relies solely on chance. Generally, the prize is awarded to only one person or a small group of winners. However, there are some exceptions to this rule. For example, a lottery may be run to make sure that everyone has the same opportunity to get something that is limited and in high demand, such as units in a subsidized housing block or kindergarten placements at a reputable public school.

Lotteries are popular because of their ability to raise large amounts of money very quickly. They also generate significant publicity and are an effective marketing tool for the products they promote. In addition, they can help governments solve problems with raising taxes or other forms of public finance. However, despite their popularity, it is important to understand the limits of lottery use and its potential for abuse.

State lotteries typically operate along similar lines: they legislate a monopoly for themselves; establish an agency or public corporation to manage them (as opposed to licensing private firms in return for a share of the profits); start with a modest number of relatively simple games; and, under constant pressure to generate additional revenues, progressively expand their offerings in size and complexity. As a result, few, if any, lotteries have a coherent “lottery policy.”

The first recorded lotteries were held in the Low Countries in the 15th century. Town records from Ghent, Bruges, and Utrecht refer to raising funds for wall building, helping the poor, and other town purposes by selling tickets with a chance of winning a prize of cash or goods. The lottery was so successful that by the 17th century it had been adopted in most of Europe and was widely hailed as a painless form of taxation.

In the American colonies, Benjamin Franklin organized a lottery to help finance his campaign to buy cannons for Philadelphia during the Revolutionary War. Lotteries were a common method of raising funds for many projects in the colonies and had widespread acceptance, although they were often abused. They were eventually outlawed in 1826.

The vast majority of those who play lotteries are middle-income and come from suburban neighborhoods. They are more likely to be men than women and have a higher income than the national average. Studies have found that the poor participate in lotteries at far lower levels than their percentage of the population and receive a smaller proportion of the prizes. Despite this, there is no evidence that the poor are turning to lotteries as a way to escape poverty. It is more likely that they are using these games to increase their standard of living. This is a classic case of an activity which increases utility, but which ultimately decreases the overall utility of society.