How the Lottery Works

The practice of making decisions and determining fates by the casting of lots has a long history, from biblical references in which Moses is instructed to divide land among Israel’s people to Roman emperors who used it to give away property and slaves. Modern lotteries typically consist of a fixed prize pool, the value of which is calculated after all expenses (profit for the promoter, costs of promotion, and taxes or other revenues) are deducted.

In the immediate post-World War II period, many states viewed lotteries as a way to expand services without increasing taxes. By the 1960s, however, this arrangement started to break down as inflation caused state government budgets to balloon. And by the 1980s, lottery revenues had reached such a size that they were no longer a negligible part of the revenue mix.

Despite astronomical odds, lottery play remains popular. Researchers have attributed its widespread appeal to rising economic inequality, coupled with a newfound materialism that asserts anyone can become rich if they work hard enough or have the right luck. Also, a general reluctance to raise taxes led lawmakers to seek alternatives to raising them and lotteries offered the opportunity to make significant amounts of money with little effort.

But the ugly underbelly of this is that low-income people tend to gamble more heavily than those with higher incomes, and the habit of purchasing lottery tickets can come at a high cost. The average annual lottery habit is $20 per month, which adds up to a small fortune over a working life, and it can prevent individuals from saving for retirement or paying off debt quickly.