The casting of lots to decide fates and distribute goods has a long record in human history, including several instances recorded in the Bible. But lotteries that involve prizes for material gain have a more recent origin, beginning in the fourteenth century in Europe and spreading to America despite strong Protestant proscriptions against gambling.
One of the problems with gambling is that it can be very addictive. People are drawn into it with promises that their lives will be much better if they can win the jackpot. This resembles the covetousness that God forbids: “You shall not covet your neighbor’s house, his wife, his servant, his ox, or his donkey” (Exodus 20:17).
Nevertheless, lotteries are a huge business. After the costs of running and promoting the lottery are deducted, a large percentage goes as revenues and profits to the organizers, with the remainder being available for prize winners. The bigger the prize, the more money that can be paid out. The lure of a big jackpot draws in players from far and wide, and ticket sales rise dramatically for rollover drawings. The resulting boom has driven up state revenues, but it has also caused a number of states to struggle with budget deficits.
In the late nineteen-sixties, as the costs of a rising population and inflation overwhelmed state revenues, many states found themselves with a thorny dilemma: They could balance their budgets by raising taxes or cutting services, but both options were highly unpopular with voters. A solution emerged in the form of a national lottery, which would draw players from all over the country and provide revenue to struggling states without inflaming an already sensitive antitax sentiment.
As the popularity of the lottery grew, the odds of winning rose, too. People were willing to pay more money to improve their chances of winning, even though the additional investment hardly constituted rational choice. The odds of winning a prize increased from one in three million to one in thirty-five million, but it didn’t feel like the difference was all that significant.
The result was a massive distortion in resource allocation. Those who played the lottery spent a larger share of their incomes on tickets and pari-mutual betting, while those who did not play lost a smaller proportion of their incomes on these activities. Research has shown that the least wealthy and minority households lose a greater proportion of their incomes on lottery tickets and pari-mutual betting than wealthier whites.
During the boom, a growing sense of skepticism about government and the prosperity that comes with hard work led to an increase in antigovernment rhetoric, which fed into a populist backlash against public services. The resulting “tax revolt” of the eighties inspired state legislators to look for ways to reduce spending without enraging an increasingly hostile electorate. They turned to the lottery to do it, and, with its mystical appeals to unimaginable wealth, became an indispensable part of American life.