Public Policy and the Lottery

Lottery is a popular activity with a long history. Its origins are found in ancient times—the Old Testament instructs Moses to use it to distribute land, and Roman emperors used it to give away property and slaves—and it remains today’s dominant method for funding public works projects and schools. It has a wide following among many demographic groups, including poor and lower middle class people who have the highest probability of winning. But despite the large popularity of this form of gambling, there are concerns about its effect on poor and problem gamblers as well as the ability of state governments to manage an activity from which they profit.

Cohen begins by describing how New Hampshire launched the modern era of state-run lotteries in 1964, and thirteen states soon followed suit, most of them in the Northeast or Rust Belt. The new lotteries were introduced during a time of tax revolt, sparked by the success of California’s Proposition 13, and the nation’s slow-motion slide toward recession in the early nineteen-eighties. State government revenue began to decline and, for states with generous social safety nets, balancing the budget would mean either raising taxes or cutting services—both unpopular options with voters.

The lottery was promoted as a way to avoid such unpopular choices, offering “painless” revenue for the state. But, as Cohen notes, it also spawned a complex web of special interest constituencies that feed off lottery revenues: convenience store owners (lottery advertising typically targets those stores); the dozens of companies that supply the tickets; teachers (in states in which lottery proceeds are earmarked for education); and state legislators (who, in turn, become accustomed to the extra funds).

In addition to these general interests, lotteries are often promoted in ways that are especially appealing to minority communities, since the likelihood of winning a prize is proportionally higher in those groups. This strategy has led to concerns about state-sponsored advertising, particularly in the context of racial justice.

A major argument for state-sponsored lotteries is that the money they raise benefits a specific public good, such as education. But the percentage of lottery revenue that is devoted to these programs is not known, and it may be quite small. Moreover, there is no evidence that the lottery is effective in improving educational outcomes.

Finally, the reliance on lotteries as a source of revenue runs counter to the principle of sound fiscal management. Lottery profits should be weighed against their costs, which are likely to exceed the proceeds from other sources of state income.

Lotteries are popular, but they do not benefit the broader society and can contribute to inequality. It is time for state leaders to recognize this and consider alternatives to gambling.