Is the Lottery a Good Use of Public Funds?

Lottery is an activity where people spend billions of dollars a year, hoping to win the big prize. But what does this exercise really say about the way we value winning? And, more importantly, is this a good use of public funds?

It turns out that the answer is complicated. On the one hand, it’s not clear that most players understand how unlikely it is to win. Nevertheless, they still make the decision to purchase a ticket because it provides them with a certain amount of entertainment or non-monetary gain. The disutility of the monetary loss is outweighed by the expected utility of the monetary gain, so this is a rational choice for them.

In addition, there’s the fact that many lottery players have a deep belief in karma, believing that their actions will somehow return to them. But, as we’ve seen in the case of tobacco or video games, the government isn’t above manipulating this psychology for its own purposes. Lotteries are no exception, and everything from the math behind the jackpots to the design of lottery tickets is designed to keep people coming back for more.

In the immediate post-World War II period, state governments facing budgetary crises and an anti-tax electorate jumped on the lottery bandwagon. They saw it as a “budgetary miracle, the chance for states to make money appear seemingly out of thin air.” They believed that if they could sell enough tickets, they would be able to maintain their services without raising taxes, thus satisfying an electorate that was growing increasingly hostile to tax increases.