A lottery is a scheme of distribution of prizes by lot or chance. It may be used as a means of raising money for state or charitable purposes, or as a form of entertainment. It is often associated with gambling, but it can also be a form of social control. In the early days of lotteries, prizes were often a mixture of money and goods or services. The term lottery was probably inspired by the casting of lots, a practice dating back to ancient times, when people used to draw slips of paper with names from a container or box, as in the biblical story of the twelve apostles. The term came to be applied specifically to a drawing of lots for money, as in the modern national and state-run lotteries.
In his book, Cohen tells the tale of how state legislatures became enamored with the money that could be made by running a lottery. In the mid-twentieth century, he writes, states were facing big budget challenges that had to be addressed by either increasing taxes or cutting public spending. The latter option, which was deeply unpopular with voters, led many state leaders to embrace the idea of a lottery.
The idea was that, if you could get people to play a game that they know the odds are against them, they’ll feel like they’re doing something good, and that it’s their civic duty to do so. It’s a message that is still being broadcast today.
If you talk to people who play the lottery, they’re generally quite clear about the odds and how they work, and they know that they’re going to lose more than they win. But they’re doing it anyway. Some people spend $50, $100 a week on tickets, and I’ve found that they defy the expectations you might have, which is that these are irrational, impulsive people who don’t understand how odds work.
These people are playing for a chance to win a fortune that they can’t really afford, and studies show that they’re disproportionately lower-income, less educated, nonwhite, and male. So critics say they’re basically paying a hidden tax on those who don’t have the money to spare, with very little actual benefit for the rest of us.
Then there are the costs of operating a lottery and advertising it. It’s not uncommon for states to pay high fees to private advertising companies to help boost ticket sales. And then there are the taxes on winnings, which are typically at least a small percentage of the total prize money. All of these add up to a significant cost for states. And Cohen points out that, as with any tax, the winners aren’t necessarily the ones who need it most. To keep up with all the latest in personal finance, subscribe to NerdWallet.