A lottery is a form of gambling in which tickets are purchased for the chance to win a prize. The prizes may be cash or goods. The winning ticket is selected by random drawing. It is important that the lottery is conducted fairly. If the probability of winning is too low, it will not attract enough participants and if the probability of losing is too high, it will discourage participation. It is also important that the lottery has a large jackpot to draw in big money players. This will make the winnings worth the risk for many people.
Historically, states used lotteries to raise revenue for a variety of public purposes. In the seventeenth century, for example, the Dutch state-owned Staatsloterij ran a national lottery that collected funds to build town fortifications and provide charity for the poor. The practice was also popular in England, where Elizabeth I chartered the nation’s first lottery in 1567. The ticket cost ten shillings, or about twenty dollars in today’s currency, and each player received a get-out-of-jail-free card that protected them from arrest for certain crimes, including piracy, murder, and treason.
In the eighteenth and nineteenth centuries, state-run lotteries gained in popularity and legitimacy because they were perceived as a painless form of taxation. Unlike sales or income taxes, lottery revenues were earmarked for specific government services and could not be diverted to other uses. Politicians, who feared a backlash from voters in the wake of tax increases, hailed lotteries as “budgetary miracles” that allowed them to maintain existing services without raising taxes and risking defeat at the polls.
These campaigns were extraordinarily successful, but they were also wildly misleading. For one thing, they inflated the size of lottery revenues relative to state budgets. In California, where a high-profile campaign was launched to promote a state-run lottery, officials claimed that the resulting revenue would cover five per cent of K-12 education spending.
As lottery advocates grew aware that their claims were unsupportable, they began to reframe their arguments. They stopped arguing that a lottery would float most of a state’s budget and instead claimed that it would subsidize a single line item, usually some form of public service—most often education, but occasionally elderly care or aid for veterans. This approach gave political cover to white voters, who did not want to support gambling but could argue that supporting the lottery was a vote for better schools in suburban areas they tended to favor.
The wealthy still play the lottery, of course, but they tend to buy fewer tickets than do the poor. People making over fifty thousand dollars per year spend on average one per cent of their income on tickets; those earning less than thirty-five thousand spend thirteen per cent. And, because rich people are able to afford to lose a much smaller percentage of their paychecks, they have a greater tolerance for the disutility of monetary losses. This is why the odds of winning a prize are so low.