The Lottery – Is it Right For You?


Lottery is a game where people pay for tickets and then win prizes if their numbers match those randomly spit out by machines. People play it to win money or other goods, like units in a subsidized housing block, kindergarten placements at a reputable public school, and, increasingly, even state government funds. It’s a form of gambling that some governments outlaw, others endorse to the point of organizing a national or state lottery, and still others regulate.

But the underlying rationality behind a lottery is not obvious to everyone. While decision models based on expected value maximization show that someone who maximizes expected utility would not purchase a ticket, they don’t capture all the reasons to buy one. For some purchasers, the entertainment value of participating in a lottery may outweigh the disutility of monetary loss.

For others, a ticket is simply an opportunity to indulge in a fantasy of wealth. The nineteen-seventies and eighties, when the lust for lottery winnings exploded across America, coincided with a decline in financial security for most working people. Pensions shrank, health-care costs rose, and our long-standing national promise that hard work would render us better off than our parents’ generation eroded.

A winning lottery ticket can be paid as a lump sum or in an annuity payment. A lump sum grants immediate cash, while an annuity guarantees larger total payouts over time. To decide which option is best for you, consider your financial goals and the applicable rules around the specific lottery.