How Does the Lottery Fit Into State Budgets?

In America, the lottery is more than just a popular game of chance. It’s also a way for states to raise revenue—though just how meaningful that money is in broader state budgets, and whether it’s worth the trade-offs that people make by buying tickets, is an open question.

Lotteries date back to ancient times; for example, Numbers 26:55-55) tells Moses to distribute land by lot. In the seventeenth century, the Continental Congress used a lottery to raise money for the Revolutionary War. Privately organized lotteries were popular in England and the United States; they helped finance everything from roads to canals to churches to colleges, including Harvard, Yale, and Princeton.

Despite Protestant proscriptions against gambling, early American colonists used the lottery to help settle the new country and fund public projects. In 1745, the first authorized lottery in Massachusetts Bay Colony raised funds for the building of a church and for establishing a militia. Later, the settlers’ war with the French and Indians was financed by lottery proceeds, as were many of the colonial towns’ public buildings, including libraries, schools, hospitals, and canals.

Cohen argues that the modern lottery started, not with an inexplicable human impulse to gamble, but when growing awareness of the big bucks to be made in this business collided with a state funding crisis. In the nineteen-sixties, with a burgeoning population and rising inflation and the costs of the Vietnam War, it became increasingly difficult for states to balance their budgets without raising taxes or cutting services, both options unpopular with voters.

The solution, states realized, was to promote and regulate lotteries as “budgetary miracles”—a way to raise needed revenue without hiking taxes or facing punishment at the polls. In 1964, New Hampshire held the first state-run lottery of the modern era; other states soon followed suit.

Unlike some other forms of government-sponsored gambling, lotteries are explicitly designed to entice repeat players by exploiting their psychological weaknesses. Everything from the slick, high-concept advertising campaigns to the layout of the tickets and even the math behind them is a transparent attempt to keep people coming back for more. It’s not that different from the strategies used by video-game companies or tobacco manufacturers.

But the bottom line is that, unless you win the Powerball, your chances of winning are incredibly slim. And it’s better to put that money into an emergency savings account or paying off debt than it is to risk losing it all on a ticket. That’s why it’s important to understand the true cost of the lottery before you buy your next ticket. If you do, you might be surprised to find out just how much you’re really trading for a tiny bit of hope.