How the Lottery Works

In colonial America, lotteries played a key role in financing a wide range of private and public ventures: roads, libraries, wharves, colleges, and churches. George Washington even sponsored a lottery in 1768 to fund his expedition against Canada.

Despite their popularity, lotteries have some ugly underbellies: they tend to have low prizes relative to their overall revenues; they can be addictive; they disproportionately target poorer individuals; and the revenue they generate is often diverted to marketing expenses, administrative costs, and prize payments. But these problems don’t seem to deter state governments from launching and maintaining lotteries, which enjoy broad popular support and have consistently won legislative and public approval for their operations.

The word “lottery” is taken from the Dutch noun lot, meaning fate. The modern lottery is a state-run monopoly that begins with the state legitimating a monopoly for itself by creating a public corporation to run it; sets its own rules and regulations; starts out modestly, typically by offering a small number of relatively simple games; and then, in order to maintain or increase revenues, progressively expands into new games. As a result, lottery revenues tend to grow dramatically at first and then flatten out and sometimes decline over time.