Is the Lottery an Appropriate Function of Government?

The lottery is a popular source of public funds for many different types of projects. It is also seen as a painless form of taxation. Consequently, lotteries have enjoyed broad support across state lines. However, it is important to understand the reasons for this support and to recognize the limitations of lotteries as a tool for financing public needs.

Until the 1970s, most lotteries were little more than traditional raffles in which the public bought tickets for a drawing to be held at some time in the future. Innovations in the 1970s radically changed the industry. The first major development was the introduction of “instant” games in the form of scratch-off tickets. These tickets offered smaller prize amounts but higher odds of winning — often 1 in 4. Instant games have become the dominant form of lottery and have produced impressive revenues.

These revenues have increased dramatically, but they are likely to eventually level off or decline. In addition, the constant influx of new games can lead to boredom for some players and even cause them to stop playing altogether. Thus, a question arises as to whether running a lottery is the appropriate function of government.

A key factor in lottery success is the extent to which the proceeds are perceived as benefiting a particular public good. This is especially true when the proceeds are viewed as an alternative to a direct tax. In fact, this argument is so effective that it has won widespread support even when the objective fiscal conditions of a state are excellent.