Is Running a Lottery Right For Government?

Lottery is a business, and businesses are designed to persuade people to spend money. This, in turn, leads to some serious questions about whether running a lottery is the right thing for government.

Lotteries started, Cohen explains, when growing awareness of the money to be made in gambling collided with a crisis in state finances. In the nineteen-sixties, inflation and the cost of the Vietnam War began to make it impossible for states to pay for their expanding social safety nets without a major tax increase or cutting services, both of which would be unpopular with voters.

Advocates of lotteries argue that a ticket is a low-cost way to get an expensive prize, and that the entertainment value, or at least a non-monetary benefit, exceeds any loss of utility that might be incurred by spending ten shillings on a lottery ticket. But the fact is, if you play the lottery enough, you will lose money. And if you’re poor or have other financial problems, losing money on lottery tickets can be particularly devastating.

Another issue is the fact that in some countries, including the U.S, winnings are not paid out in a lump sum, but in an annuity that will be taxed over time. In these cases, the winner is likely to pocket less than advertised, owing to the time value of money and income taxes. This is a problem that a lot of people don’t know about or consider when they buy tickets.