Lottery is a type of gambling in which participants pay for a chance to win a prize, which may be money or property. The term is also used to describe a process of allocation or selection, such as the drawing of lots to determine military conscription or commercial promotions in which prizes are awarded by chance. The federal Lottery Act defines lottery as an arrangement “by which one or more prizes are allocated by a process that relies wholly on chance.”
While making decisions and determining fates by the casting of lots has a long record, public lotteries to raise funds have a much shorter history, dating back to at least the 15th century in the Low Countries. These were aimed at raising money for town fortifications, and to help the poor. Privately organized lotteries, including those involving the sale of goods and properties, were more common in England and America, where they served as alternative mechanisms for obtaining voluntary taxes. They also helped build many American colleges, including Harvard, Dartmouth, Yale, and King’s College (now Columbia).
The modern state lottery generally follows a similar pattern: the legislature legislates a monopoly for itself; it establishes a public corporation to run the operation or a commission to oversee it; it starts with a small number of relatively simple games; it tries to ensure that the games are fairly distributed among different socio-economic groups; and, as revenues rise, it expands by introducing new games and promoting them through extensive advertising.
Revenues often grow dramatically when the lottery is first introduced, and then level off or even decline, due to a “boredom factor.” To counter this, a constant stream of new games must be added to keep revenues up. This creates an incentive for the operators to use deceptive advertising practices, such as presenting misleading information about the odds of winning a given game or the jackpot amount; inflating the value of a prize (by describing it as paid in equal annual installments over 20 years, even though inflation and taxes will dramatically erode its current value); and so forth.
In addition to the problems of lotteries themselves, they produce a variety of social costs. Lottery play is concentrated in middle-income neighborhoods, while people from lower incomes participate at a much smaller rate. People with higher levels of formal education also tend to play the lottery less frequently than those with lower educational levels. Finally, the lottery tends to attract people with a tendency toward compulsive and addictive behaviors.
Despite these serious issues, the lottery remains popular and is widely supported by the general public. The reason is that lotteries are often portrayed as a way for government to provide essential services without raising taxes. This argument is particularly effective in periods of economic stress, when a government’s fiscal health is in question and its programs are threatened with cuts or tax increases. But the argument has little bearing on a state’s actual fiscal condition, as research shows that the popularity of a lottery is not related to its overall budget deficit.