In a time when the economy is weak and states are seeking revenue sources, many have turned to lotteries. They are popular, with Americans spending an estimated $80 billion a year on tickets. But lotteries have a long and sometimes troubled history, both as private games and public policy initiatives.
Typically, a state adopts a lottery, then legislates a monopoly for itself and creates a state agency or public corporation to run it (as opposed to licensing a private firm for a cut of the profits). It starts with a modest number of relatively simple games; revenues quickly expand, but eventually begin to level off and possibly decline, requiring constant innovations in the form of new games.
One major argument used to promote state lotteries is that proceeds are earmarked for a specific public good, such as education. This argument has been effective, although studies have shown that the public’s approval of a lottery is independent of its actual fiscal condition.
Other critics charge that the advertising for state lotteries often misrepresents odds of winning and that winners are swayed by the promise of “painless” taxes, in which players voluntarily spend money to help government programs (which are ultimately financed by other taxpayers). In addition, research suggests that the poor participate at lower rates than do middle-income residents, making lotteries a potentially unfair source of tax revenue. Some have even advocated eliminating state lotteries altogether.