What is the Lottery?

The lottery is a method of raising money for public projects by selling tickets containing numbers that people have chosen. The winning numbers are chosen by chance and the ticket holders who have chosen those numbers win prizes. In the United States, state governments have granted themselves monopolies over lotteries and, in most cases, the profits from lotteries are used to fund government programs. As of August 2004, there were forty-three states and the District of Columbia that operated lotteries, with many of them allowing residents of other states to buy tickets.

In general, state lotteries follow similar structures. The state legislates a monopoly for itself; establishes a public agency or public corporation to run the lottery (as opposed to licensing a private firm in exchange for a cut of the profits); begins operations with a modest number of relatively simple games; and, as demand for the opportunity to win large prizes grows, progressively expands the scope and complexity of the lottery.

The principal argument for adopting a lottery is that it will generate revenue for government without increasing taxes. Studies have shown that this rationale is effective in obtaining the public’s approval, and it is especially persuasive during periods of economic stress or uncertainty. However, despite the popularity of this strategy, research has also demonstrated that the objective fiscal health of state governments does not have much bearing on whether or when they establish a lottery. Instead, lotteries appear to be popular in part because they offer an opportunity to imagine a brief moment of “what if.” The entertainment value and/or other non-monetary benefits of the lottery provide enough utility for a significant proportion of individuals to outweigh the disutility of a monetary loss.