The lottery is an unpopular business. It takes money from people who don’t want to lose it, in order to give it away to people who don’t care enough about winning it. It’s a regressive tax, taking more from the poor than the rich, and it’s not terribly profitable. But state governments keep doing it, because they need the money and they think that lotteries are the only way to raise it without raising taxes.
In the late-twentieth century, states began casting around for ways to fill their budget holes that wouldn’t enrage an anti-tax electorate, and the lottery became an appealing option. As Cohen writes, “The idea was that the government could raise revenue through a process with low social costs that did not require an affirmative vote.”
Lotteries are a big business, and they need to attract large numbers of participants in order to turn a profit. That’s why they advertise massive jackpots on television, and that’s why they make the prizes grow to apparently newsworthy amounts, even when doing so makes it less likely that anyone will win. It’s a trick, but it works.
There are also serious social costs to the lottery. The regressive nature of the games hurts low-income communities, which are more likely to play. They are marketed to these communities, which have little discretionary income to spend, and they are encouraged to see gambling as a way of quickly building wealth. They are led to believe that if they buy more tickets, they will win more often. In fact, they will not, and that’s not what a lot of these gamblers want to hear.
State lotteries aren’t above leveraging the psychology of addiction, either. They use all the tactics of marketers and video-game manufacturers to keep players coming back. And they aren’t above using the same kinds of deceptive tactics as tobacco companies and banks.
In the United States, where there is no national lottery organization, individual state lotteries offer a variety of games. These typically include three-digit and four-digit number games; a keno-like game; and instant scratch-offs. Some have a game with a progressive jackpot, and others have a single prize of a predetermined amount.
While a large percentage of lottery profits are paid out as prizes, some is used to cover administrative expenses. In addition, state lotteries often run advertising campaigns and sell merchandise to increase sales. Despite these costs, the net revenue from the games is quite small: between 1964 and 2019, they raised an estimated $502 billion. That may sound like a lot, but it’s only about 1 to 2 percent of total state revenue. And it’s collected inefficiently, and only about 40 percent of the proceeds actually go to the state. The rest is eaten up by a host of other costs.