What is a Lottery?

Since New Hampshire introduced the first state lottery in 1964, the phenomenon has spread to nearly every corner of America. Despite their enormous popularity, though, lotteries remain an odd and often misunderstood phenomenon. The largely uncontested message from the lottery industry is that they’re fun, and the experience of scratching a ticket is a great reward in our fast-paced society. But a closer look at the underlying forces shows that the true nature of lotteries is quite different. They’re an effective tool for states to collect vast sums of money with little visible effort, while masking the regressive and extractive nature of the activity.

Essentially, a lottery is a system for the distribution of prizes by lot or chance. The prize money may be cash, goods, or services. Those participating in the lottery are said to enter the lottery through a “purchase” or “assignment of tickets.” The result of the drawing or lottery is determined by chance; the prize winners are selected by a random process. The casting of lots for decisions and determination of fates has a long history in human history, including several instances in the Bible, but the use of lotteries for material gain is more recent.

In colonial era America, lotteries played a major role in raising funds for private and public projects. They were used to finance roads, ports, schools, and churches. Lottery revenues even helped fund the establishment of Harvard and Yale universities. At the outset of the Revolutionary War, the Continental Congress relied on a lottery to raise funds to support the army.

When lotteries gained state sanction in the early 20th century, they did so with broad and sustained public approval. This was especially true when the proceeds were earmarked for educational purposes. The lottery was seen as a way for citizens to “pay for their own education.”

Lottery revenues are now, by some estimates, responsible for about two-thirds of the total public funding for higher education in most states. Interestingly, the success of the lottery in winning and retaining public support has little to do with a state’s actual financial health, either during good or bad economic times.

This is due in large part to the way state lottery policies are developed. Decisions are made piecemeal, and there is little or no overall oversight. The resulting structure is an excellent example of policymaking by fragmentation. Authority is divided between legislatures and executive agencies, with lottery officials inheriting policies they can do nothing to change. Furthermore, the evolution of the lottery is often driven by the interests of particular constituencies: convenience store owners (who sell the most tickets); lottery suppliers (heavy contributions to state political campaigns are routinely reported); teachers, etc. Consequently, the growth of the lottery is often accompanied by a rapid expansion in other forms of gambling. And this, in turn, leads to the emergence of a whole host of problems. See the next article for further discussion of these issues.