Is the Lottery a Good Use of State Revenues?


The lottery is one of America’s most popular forms of gambling, but it also raises enormous sums for states. The big draw, of course, is winning a jackpot that will turn you from poor to rich. This is why many people buy tickets, even if they know that the odds of winning are very slim. In 2021 alone, Americans spent $100 billion on lotteries. That’s not an insignificant sum, and the question of whether it’s a good use of state revenues deserves more attention than it gets.

The basic elements of a lottery are a pool or collection of tickets or counterfoils and a procedure for selecting winners. The tickets must be thoroughly mixed by some means of mechanical action, such as shaking or tossing; this is intended to ensure that chance alone determines the winners. Increasingly, computers are used for this purpose because of their capacity to store information about large numbers of tickets and to generate random combinations.

Some countries, including the United States, allow winners to choose between an annuity payment and a lump sum. The choice is often complicated by taxes and withholdings, which vary widely by jurisdiction. But the main point is that, even after taking into account the time value of money, a lump-sum payment is a smaller amount than an advertised annuity prize, and this is true both before and after income taxes have been applied.

A common strategy is to buy multiple tickets, ideally with different sets of numbers. This increases your chances of winning by spreading the money you’ve invested out over a larger number of possible winners. Some people also try to improve their chances by choosing numbers that have sentimental meaning, such as birthdays or anniversaries. Finally, many people participate in lottery syndicates, groups of people who pool their money to purchase a number of tickets. This can increase your chances of winning by sharing the cost of buying tickets with other people and by pooling their knowledge and experience.

I’ve talked to lots of people who play the lottery regularly, spending $50 or $100 a week on tickets. They tell me they get a lot of value out of their purchases, even when they lose. Those conversations challenge my assumptions about these people, especially the assumption that they’re irrational and have been duped by the odds. Instead, what these people are getting for their money, irrational and mathematically impossible though it may be, is hope. And that’s something we all need to remember in our daily lives.