A lottery is a game in which numbers are drawn to determine winners. It is a form of gambling that allows the public to win cash or prizes, usually organized so that a percentage of profits go to good causes. In colonial America, lotteries played a significant role in financing both private and public ventures, including roads, libraries, churches, colleges, canals and bridges.
The idea behind lotteries is that people will spend a small amount of money to get a big payout. It is this potential for instant riches that attracts many to play the lottery, but as Professor Lew Lefton explained to CNBC Make It, there is a lot more going on here than just pure chance.
To keep ticket sales robust, state governments pay out a respectable portion of proceeds as prize money. This reduces the percentage available for state revenue and use on things like education. It also obscures the implicit tax rate for lottery consumers. The poor, whose share of the pie is a greater fraction of the total, tend to spend more on tickets than the middle class and upper-middle class.
That’s regressive. It also underscores the fact that a lottery ticket isn’t just an expensive way to gamble, it’s a promise of a quick fix in an age of inequality and limited social mobility. People may know they are unlikely to win, but they buy tickets anyway because of that inextricable human impulse to dream big.