Public Benefits and the Lottery


A lottery is an arrangement of prizes, drawn by chance, to allocate goods or services. The term derives from the Dutch word lot meaning “fate.” Lotteries have long been popular, and they are one of the few government-supported gambling activities that enjoy wide acceptance in the United States. Lotteries are a major source of state revenue, generating more than $50 billion per year. They are also an important source of public good funds, helping finance everything from highways and bridges to education.

The first recorded state-sponsored lotteries to offer tickets with cash prizes were held in the Low Countries during the 15th century, and town records from Ghent, Bruges, and Utrecht indicate that the games had existed even earlier. In fact, Benjamin Franklin sponsored a lottery in 1768 to raise money for cannons to defend Philadelphia against the British, and Thomas Jefferson attempted to sponsor a lottery to alleviate his crushing debts.

Lotteries are a popular source of state revenue because they can generate large amounts of money with relatively small expenditures (the cost of producing and selling the tickets). They are typically administered by a state agency, or licensed to a private firm in return for a share of profits. To attract customers, the games must offer a sufficiently attractive prize structure. Prizes can be monetary, or they can take the form of non-monetary benefits, such as entertainment value, educational opportunities, or health screenings. In addition, a percentage of the pool must be deducted for costs and profits.

As the popularity of lotteries has grown, criticism has turned to specific features of lottery operations, such as the promotion of gambling and its negative consequences for poorer groups or problem gamblers. It has also focused on questions about whether the centralized administration of a lottery represents an appropriate function for the state.

Most advocates of state lotteries have argued that the proceeds are necessary to fund a particular public benefit, such as education. This argument is particularly appealing to voters in times of economic stress, when the prospect of tax increases or budget cuts threatens public programs that they value. However, research has shown that the popularity of lotteries is unrelated to the actual financial condition of a state, and many states have adopted them even in times of good fiscal health.

In addition, critics point out that the advertising for state lotteries often exaggerates the odds of winning and promotes a false impression that lottery money is better spent than other options for public expenditures. Moreover, the promotional messages are in direct conflict with the fact that state lotteries are commercial enterprises that must maximize revenues. As a result, they must compete with other entertainment offerings for consumer dollars. The resulting marketing practices have drawn complaints from consumers and consumer organizations. As a result, the lottery industry has had to evolve in response to increased consumer scrutiny.