What is a Lottery?

The casting of lots for a chance at wealth, health, or power has a long record in human history, as evidenced by many references in the Bible. But lotteries to raise money for specific purposes, or to award prizes to those who choose particular numbers, are much more recent in origin. The first state-run lottery emerged in New Hampshire in 1964, and thirteen states adopted them within a decade. Today, 37 states and the District of Columbia operate lotteries, generating revenues of more than $11 billion a year.

Almost from the beginning, these lotteries have been subject to intense controversy. Their advocates present them as a way to generate tax revenue without increasing taxes or cutting public programs. They also argue that the proceeds will benefit a public good. This argument is especially potent during times of economic stress, when the public may fear that state governments will cut services or increase taxes.

Critics point out that lotteries promote gambling, often fostering compulsive gambling and other problems of personal finance. They are also concerned about the regressive impact of state-run lotteries on lower-income people. And they argue that the state is at cross-purposes with its larger duty to promote the public welfare, and instead focuses on selling a form of gambling.

A central feature of all lotteries is a prize pool from which winners will receive their winnings. This pool consists of the sums paid for tickets, as well as a portion devoted to the cost of organizing and promoting the lottery, and a percentage normally dedicated to profits and revenues for the organizer or sponsor. Of the remainder, prizes are awarded to participants. The amount of the pool returned to winners varies widely, from a few large prizes to many smaller ones.

To maximize the attractiveness of a lottery, the prizes must be high enough to attract players and keep them playing. Various strategies are employed to achieve this goal, but the basic elements of any lottery are similar: a pool, a set of rules, and an incentive system for participation. Prizes can be cash or goods, with the latter generally more popular. A variety of ticket formats is available, from single-number tickets to combination entries that offer multiple chances at winning. Some are sold exclusively in retail outlets, while others are available only through the mail or at designated locations, such as check-cashing venues or gas stations.

In addition to offering prizes, state lotteries are also interested in keeping players hooked. To this end, everything about a lottery–its ad campaigns, its look, and the math behind its prizes–is designed to appeal to psychological addiction. As such, it is not unlike the strategies employed by tobacco companies or video-game manufacturers. This makes the lottery a business, and businesses are notoriously adept at exploiting psychological vulnerabilities. It is not surprising, then, that the lottery is a major source of addiction and gambling disorders among young people and adults. This article examines the evolution of the lottery, from its inception as a business to its current status as an instrument for public-policy reform.