The lottery is a game of chance, but it also provides entertainment and other non-monetary benefits. For many people, the disutility of a monetary loss is outweighed by the combined expected utility of those other gains. Thus, the purchase of a ticket is a rational decision for them. For the vast majority of those who play, however, the chances of winning are very low. As a result, the revenue generated by lottery tickets is heavily concentrated among a small group of regular players. For example, according to Les Bernal, an anti-state-sponsored gambling activist, about 70 to 80 percent of all lottery revenues come from just 10 percent of the population that plays the games.
As a result, state-sponsored lotteries are often perceived as an oppressive tax on the stupid. In addition, critics charge that lottery advertising is frequently misleading and exaggerates the potential value of a prize (lottery jackpots are typically paid in equal annual installments over 20 years, with inflation dramatically eroding the amount received); that most lottery winners do not realize that they must pay taxes on their winnings; that the money they win will be spent on the same goods and services that they could have purchased without winning the lottery; and that the lottery has become a source of addiction for some people.
Despite such criticism, the lottery has grown rapidly in popularity in recent decades. Its success has been partly driven by innovation: In 1975 Massachusetts introduced the scratch-off lottery; the “quick pick” numbers option was launched in 1982; and New Hampshire and Maine joined to form the first multistate lottery in 1985. These innovations have allowed states to raise substantial sums without imposing large burdens on taxpayers. The rapid expansion of the lottery has also been driven by the nation’s late-twentieth-century tax revolt: In 1978 California voters approved Proposition 13, cutting property taxes; and in the early nineteen-eighties, Ronald Reagan was President and federal funds to state governments declined.
Unlike most commercial products, which are marketed to consumers by a large and sophisticated marketing industry, the promotion of lottery products is almost entirely the responsibility of government agencies. This arrangement has led to a situation where state lotteries are often a classic case of public policy being made piecemeal and incrementally, with little or no consideration for the overall welfare of society. As a result, state lotteries tend to be highly dependent on revenue sources that can change with economic fluctuations, and where a single lottery product is likely to dominate the market. This is a recipe for long-term instability. In addition, many states have a history of appointing individuals with strong political connections to control their lottery administrations, further limiting public oversight of the sector. For these reasons, it is important that the federal government take steps to reduce its dependence on lottery revenues. This could be done by limiting the number of games offered and restricting the ways that lottery proceeds can be used.
