Lotteries are games of chance in which numbers are drawn to win prizes. They may be run by state governments or private companies. Prizes can be cash or goods. In many countries, winnings are taxed. Prizes may be given in lump sum or paid in annuity instalments. Winners generally prefer a lump-sum payment. The history of the lottery has been complex and sometimes controversial. Its origins go back centuries. The first recorded use of the term is in a Chinese inscription from the Han dynasty. The first modern lottery began in New Hampshire in 1964, as states struggled to balance their budgets without increasing taxes or cutting social services. This trend was accelerated by the late-twentieth century’s tax revolt, which inspired voters to cut property and income taxes and to demand lower government spending.
State governments turned to the lottery for revenue, and it proved a popular source of funding for schools, hospitals, public works, and other state-level projects. Lottery profits also made states less dependent on regressive federal funds and helped them weather the Great Depression and two world wars. In the United States, the popularity of the lottery spread quickly in the nineteen-sixties and accelerated during the tax revolt of the early seventies.
Despite the fact that most players don’t understand how unlikely it is to win, they keep playing. Lottery spending is responsive to economic cycles; as Cohen writes, “Lottery sales increase when incomes fall, unemployment rises, or poverty rates go up.” In addition, lotteries advertise heavily in neighborhoods disproportionately represented by poor or black people.
In the eighteenth and nineteenth centuries, America’s aversion to taxes combined with its need for infrastructure projects created an ideal environment for the lottery. Lotteries were able to raise money for everything from Harvard and Yale to churches and civil defense, while still being deemed morally acceptable. In fact, Cohen observes, they formed a rare point of consensus between Thomas Jefferson and Alexander Hamilton, who grasped that people would rather have a small chance of winning a big prize than a bigger chance of losing much more.
The success of the lottery owes to its appeal as an addictive game. Lotteries manipulate players by designing games with high house edges and offering huge jackpots. This allows them to sell more tickets while still making enough money to cover their operating costs. In addition, they promote the game by using slick advertising campaigns and appealing to players’ psychology of addiction. It’s not so different from the tactics used by tobacco or video-game manufacturers, though it’s usually not done under state control.