The Evolution of the Lottery Industry


The casting of lots to make decisions and determine fates has a long history in human civilization. Using the lottery for material gain, however, is much more recent. Lotteries began as a state revenue source in the 1500s, and grew rapidly during the early post-World War II period when states were building up their social safety nets and needed extra money.

During the initial decades, many people who played the lottery viewed it as a fun way to spend a little bit of their disposable incomes and hope that it would lead to big winnings. They weren’t fooled by the fact that the odds were long and that they had a good chance of losing. They also didn’t mind paying taxes on their winnings, as they saw it as a fair price to pay for an opportunity to try to get rich quick without pouring in decades of effort that might not pan out one day.

Over the years, as state lotteries have become more professional, the messages aimed at players have changed. Now they focus largely on two things. One is that the experience of buying and playing the lottery is a fun and satisfying activity. The other is that playing the lottery is a great way to save up for a down payment on a house or a car. This is a message that plays well to those who don’t really know what the odds of winning are or have no idea how many millions they might need to win to actually have a decent lifestyle in any way comparable to the middle class.

What’s more, it obscures the regressivity of the lottery, allowing people to think that it isn’t as wacky and weird as it really is and that it’s not as bad for them as the cigarette tax. As the economy worsened in the 2000s and state budgets began to shrink, this dynamic became even more pronounced.

As public policy makers debate the role of state lotteries, criticisms have moved from the general desirability of them to more specific features of their operations. Those include the problems of compulsive gamblers and the regressive impact they may have on lower-income groups, among other concerns. These criticisms are both reactions to and drivers of the continuing evolution of the lottery industry. The result is that the general welfare is being served at cross-purposes with state lottery officials’ ability to raise and spend revenues as they see fit. This is a classic case of a piecemeal approach to public policy.