When you describe something as a lottery, you mean that the outcome depends entirely on luck or chance. Which judges are assigned to a case, for example, is always a bit of a lottery. But the lottery is also a popular form of recreation and a source of state revenue, and its popularity has grown in recent years as lottery commissions have raised prize caps to make jackpots larger and larger. Now states take in more than $17.1 billion per year.
The word lottery dates back to the fourteenth century, when it was used in Europe to win town fortifications or other public works. During the Renaissance, it became a popular pastime for noblemen and royalty as well. In the seventeenth and eighteenth centuries, it spread throughout England, where it was used to fund everything from public works to charity and even wars. It was popular in America, too, and grew out of exigency: Early America was short on tax revenues and long on the need for public works, from bridges to Harvard. Lotteries were an attractive way to raise money without inflaming the country’s aversion to taxes.
Although many people play the lottery for the sheer thrill of winning, the odds of a large jackpot are very low. But it’s important to remember that the purchase of a lottery ticket is an investment of dollars, and, for many people, it’s also an opportunity to pass up the chance to save for retirement or college tuition. The gamblers who buy tickets contribute billions to state coffers, and many of those billions could be better spent on other things.
Moreover, lottery players have a particular kind of risk-aversion that can be especially acute when it comes to very large prizes. In fact, according to one study, the rich spend less of their income on lottery tickets than do the poor, because a single ticket costs so much. For people earning less than fifty thousand dollars a year, lottery purchases represent, on average, a single-digit percentage of their budgets.
It’s worth noting that lottery sales have begun to level off in some states, primarily because the huge eye-popping jackpots have been a bit harder to come by. But as long as the odds of winning remain low, people will continue to purchase tickets. It’s just human nature. As for what to do with the big prizes, there’s no one-size-fits-all answer. Some states give out a lump sum; others use an annuity payment that guarantees larger total payouts over time. In either case, the winners will have to pay taxes. That’s another reason that some people choose to avoid playing the lottery altogether.