How Governments Use Lottery Money to Fund Programs


If you buy a lottery ticket, you are wagering that the numbers you select will appear in a drawing and that you will win some prize. This is a form of gambling, and governments have historically used it to raise money for everything from bridges to wars. Today, governments often use lotteries to help fund a variety of programs including education, health care, and public parks. In the past, states marketed the lottery by arguing that it would float entire state budgets. This argument, however, lost traction in the nineteen sixties, as budget crises wracked America and it became increasingly clear that the lottery could not cover the costs of state services without either raising taxes or cutting those programs.

To counter the growing evidence that the lottery was a loser, lottery promoters began to change their pitch. Instead of claiming that a lottery would float an entire state budget, they now argued that it would fund a single line item, invariably some sort of popular and nonpartisan government service like education or elder care. This approach was more palatable to voters, as it did not appear to be an endorsement of gambling or even of gambling itself. Instead, it was an endorsement of a particular program that many people viewed as necessary and important in their lives.

Lottery promoters also changed the way they marketed their games. Instead of stressing the big prizes, they began to emphasize the low odds of winning. This strategy was ingenious because it turned the lottery into a game with a small chance of a huge payoff, making it more appealing to the gambler’s irrational urges. It was an effective strategy, and it enabled lottery promoters to attract a growing base of players who, as the number of games grew, made more and more gambles.

While promoting low odds of winning may seem counterintuitive, it is based on the idea that a monetary loss has a negative utility for most people, while a monetary gain has a positive utility. For the average lottery player, who spends a small fraction of his or her income on tickets, this calculation may be correct.

It is important to note, though, that most people do not play the lottery as they do a sport or a hobby. Most people who play the lottery do so because they feel that they have a real chance of getting rich, and there is a degree of truth to this. In fact, many people will tell you that they have a quote-unquote system for choosing their numbers and a lucky store where they buy them.

Lotteries, in other words, are no different from casinos or video games in that they are designed to keep the people who play them coming back for more. This is not an uncommon strategy for industries that are dependent on the psychological triggers of addiction, but it is not normally employed by government agencies. For these reasons, there are serious concerns about the long-term sustainability of lottery promotion strategies based on low-probability, high-stakes betting.