The Evolution of the Lottery

The casting of lots to determine decisions and destinies has a long history, including several instances in the Bible. The first recorded public lotteries to offer tickets for sale with prizes in the form of money were held in the Low Countries during the 15th century to raise funds for town fortifications and to help the poor. In modern times state lotteries have become a widespread and controversial method of raising government revenues without increasing taxes. Initially they expand rapidly and then begin to level off or even decline, leading to what has been called “lottery boredom.” To maintain or increase revenue states have introduced new games.

When lottery proceeds are earmarked for some specific public good, the game enjoys broad public approval and support. For example, the money for a college scholarship program is awarded through a lottery, as are housing unit assignments at some universities. The lottery has also been used to assign medical residency positions.

A key argument for adopting a state lottery is that it offers a source of tax revenue without the politically fraught debate over tax increases or cuts in other programs. While this logic may be persuasive, it fails to consider the fact that lottery revenues are a type of hidden tax on the general population. In the eyes of many voters, a lottery is simply another way that government takes their money against their will.

Once a state lottery is established, it develops extensive and specific constituencies: convenience store operators (the main vendors for the games); suppliers of the lottery equipment, services, and supplies; teachers (in states where lottery proceeds are earmarked for education); and state legislators (who receive significant campaign contributions from the suppliers and become accustomed to the large additional income that the lottery provides). These constituencies exert substantial influence over the evolution of the lottery, but the objective fiscal circumstances of the state do not seem to have much bearing on whether or when a lottery is adopted.

When someone wins the lottery, they can choose to receive a lump sum or an annuity payment. Each choice has its own advantages and disadvantages. Lump sums can be invested in assets, while annuities provide a steady stream of payments over time. The choice of which option is best depends on one’s financial goals and the applicable rules and regulations.

In colonial era America, lotteries raised money to fund building projects such as streets, wharves, and churches. Benjamin Franklin ran a lottery in 1748 to raise funds for cannons for the defense of Philadelphia against French invasion, and George Washington sponsored a lottery in 1767 to build a road across Virginia’s mountains, although it failed to earn enough money. Today’s modern lottery is a highly complex operation, with numerous players and multiple ways of selecting winners. The most common methods include a draw of numbers or symbols, a machine-based selection process, and computer-generated random number generators. Some lotteries have no physical location, with participants submitting their choices via telephone or the Internet. Lottery is a multibillion dollar industry, with revenues growing rapidly worldwide.