Lottery Advertising and the Public Interest

Lottery is a form of gambling in which participants pay a small amount of money (often as low as a couple of dollars) for the chance to win a large prize, such as cash. Its origins go back centuries, with a record of the casting of lots in the Old Testament and later in Roman times for giving away land or slaves. It was brought to America by British colonists and initially met with negative reaction, with ten states banning it between 1844 and 1859.

Since New Hampshire initiated the modern era of state-run lotteries in 1964, more than half the states have passed laws allowing them. Most people who play the lottery do so for entertainment value or other non-monetary benefits, but critics argue that this doesn’t justify the state’s investment of public funds in a system that is likely to produce substantial losses.

The prevailing view is that the monetary gains of winning a lottery are far outweighed by its costs, including skewed distribution, and that the public would prefer a small chance of a big reward to a smaller chance of a bigger loss. But that logic is flawed, as a simple example shows. A person who purchases a ticket for a fifty-fifty chance of winning $10 million is not making a rational decision, because the expected utility of the monetary gain is zero and the risk of losing $1,000,000 is high.

Moreover, a large part of the lottery’s profits are used to promote the lottery itself and to defray its administrative expenses. As a result, it is not possible to calculate the exact net profit from each lottery entry. But even if the prizes are only a small portion of the total revenue, they can have an enormous impact on a society’s moral fabric.

To maximize the chances of winning, a lottery must attract a large population of players, and this requires extensive advertising. Because the industry is run as a business with a primary focus on maximizing revenues, advertising necessarily conveys a message that encourages people to spend their money on tickets. This may be at odds with the public interest, especially in terms of the potential for compulsive gambling and its regressive effect on lower-income groups.

A major factor in the success of lottery advertising has been a change in the public’s perception of its purpose, with the growth of the welfare state in the immediate post-World War II period. In that era, many Americans believed that lottery revenues could allow the state to expand its social safety-net services without raising taxes on middle- and working-class people. But as the nation’s late-twentieth-century tax revolt intensified, this arrangement began to erode. By the early seventies, states that depended on lottery income to fund their social safety nets were losing their ability to sustain them. As a result, the number of states that rely on lottery revenue is now down to just twelve. This has shifted the focus of debate to more specific features of the operation of lotteries and their impact on society.