Americans spend over $80 Billion on lottery tickets every year, and the prizes are huge. But where does the money come from?
The prize pool in a lotteries is derived from ticket sales, the profit for the promoter (and some other revenue sources), and taxes or other public funds. Often, a large prize is offered along with many smaller prizes, and the total value of the prizes is usually displayed on the promotional material for the lottery.
Lotteries have a long history as a method of raising funds for a variety of private and public ventures. The practice was common in colonial America and helped finance such projects as roads, canals, churches, colleges, and even the erection of the first few American universities (Harvard, Dartmouth, Yale, King’s College [now Columbia], and William and Mary). Benjamin Franklin promoted a lottery to raise funds for cannons to defend Philadelphia during the American Revolution, and Thomas Jefferson held a private lottery to alleviate his crushing debts.
State governments rely on the public perception of the lottery as a good thing to do, because they need to expand their array of services without the burden of onerous taxes on working class and middle-class residents. Moreover, the promotion of the lottery sends the message that even if you don’t win, you can still feel like you did your civic duty and helped the state by buying a ticket.
But the lottery industry is run as a business, and its main goal is to maximize revenues. So it advertises the chances of winning, and in doing so plays on people’s deepest psychological needs for instant riches and a sense of meritocracy. In addition, lottery advertising is designed to appeal to the most vulnerable parts of the population, including those with a history of gambling addiction or mental health problems.
The bottom line is that while lottery advertising may be legal and the proceeds from ticket sales are earmarked for specific purposes, it is also a form of promotion that can have serious social consequences. It promotes gambling in a time when inequality is at record levels and opportunities for advancement are limited, and it can contribute to problems such as poverty, addiction, and crime.
State officials need to take a hard look at the way they govern the lottery, and how it affects the overall public interest. It is a classic case of public policy being made piecemeal and incrementally, with little oversight or coordination among different departments and agencies. As a result, lottery officials frequently find themselves operating at cross-purposes with the general public interest. That is not an appropriate function for a government agency.