Throughout history, people have used lotteries for all kinds of purposes. Some examples are the casting of lots for the distribution of property in ancient times and, more recently, the awarding of prizes to lottery players. Generally, these lotteries have not been outlawed, but they have come under attack from those who say that they promote gambling and have negative consequences for the poor and compulsive gamblers. While there are legitimate concerns about lottery abuses, the fact is that state-run lotteries do serve important public functions. They raise funds for various public projects, and they provide a steady stream of revenue to the state government. In addition, lottery revenues are not taxed, and the money is often used for good causes such as education.
The term “lottery” has its roots in Middle Dutch loterie, meaning “action of drawing lots,” which probably derives from Old English llotin, from a base word lót, meaning “fate” or “destiny.” The first recorded public lotteries to offer tickets for sale with prize money occurred in the Low Countries in the 15th century; town records in Ghent, Utrecht, and Bruges refer to a number of these events, raising money to build walls and other town fortifications and to assist the poor.
Lotteries are popular, and most states have them. But, the way they operate – as businesses that compete with each other for consumer dollars – raises several questions. These include whether they do more good than harm; whether the poor and the addicted are disproportionately affected by their operations; and, as the state government’s fiscal health deteriorates, whether they will continue to win broad public support.
The underlying issue is that public policy about lotteries is made piecemeal, and the process is highly political. Lottery legislation is introduced by a specific legislature; state agencies or public corporations are established to run them; they start operations with a modest set of relatively simple games; and, due to continued pressure for more revenues, they progressively expand their offerings to a greater degree than would be possible under private enterprise. As a result, they develop substantial specific constituencies, including convenience store operators (who sell the tickets); lottery suppliers (heavy contributions to state political campaigns are regularly reported); teachers (in states in which the proceeds of a lotteries are earmarked for education); and state legislators, who quickly become accustomed to the new income source.
In addition, lotteries are attractive to a significant segment of the public because they are advertised as supporting a particular public service or goal, such as education. These arguments are effective, particularly in times of economic stress when states need to raise taxes or cut programs. In addition, studies show that lotteries are very popular among lower- and middle-income Americans and a disproportionately large share of them play every week. This skews the statistics about overall participation in the lottery, and also distorts the debate about its pros and cons. This article was originally published in the February 2015 issue of The Weekly Standard.