The lottery is a form of gambling in which people purchase tickets for the chance to win a prize. It’s not only a popular form of entertainment, but it also has a long history as a source of public funding for everything from public works projects to social welfare programs. In the immediate post-World War II period, it was a common practice for states to use lotteries as a means of expanding their range of services without onerous taxes on working-class families.
In the first few decades after New Hampshire became the first state to establish a lottery, sales soared and state governments began to rely on them for a significant share of their revenue. However, while lottery proceeds are a substantial part of many state budgets, they’re not as transparent as traditional taxes, and consumers don’t always understand the implicit tax rate on their ticket purchases.
To keep ticket sales robust, state lotteries often pay out a large percentage of their total sales in prize money. This reduces the amount that’s available for general revenue and spending on things like education, which is supposed to be the ostensible reason for states to have lotteries in the first place. This is why so few state voters raise their eyebrows when their tax dollars are spent on lotteries, even though the vast majority of people who buy tickets aren’t wealthy enough to have a substantial impact on government spending.
While there is certainly an inextricable human impulse to play the lottery, the truth is that most winners don’t have much of a plan for what to do with the money they win. The overwhelming majority of them will spend it on things that aren’t necessarily the best financial decision for them. Many of them will continue to work hard, but others will quit their jobs, move to a different city or even change careers. Despite the fact that winning the lottery is almost impossible, many people have developed quote-unquote systems for picking numbers and buying tickets that are totally unsupported by statistical reasoning. They’ve come to the logical conclusion that, for whatever reason, the lottery might be their last, best or only chance of getting ahead.
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality to bankruptcies. His work has appeared in the Los Angeles Times, Wall Street Journal and other national publications.
The term lottery comes from the Dutch noun lot, meaning “fate,” which could be literally translated as “a drawing of lots.” This custom dates back to the 15th century, when towns in the Low Countries held public lotteries to raise money for town fortifications and help the poor. A record from 1445 at L’Ecluse refers to a lottery for “money and goods.” In the late 16th and early 17th centuries, private promoters ran state-sponsored lotteries with more generous prizes. The oldest still-running lottery is the Staatsloterij of the Netherlands, which was founded in 1726.