Unlike private lotteries, where proceeds go to individuals who purchase tickets, state-run lotteries are intended to benefit the general public. As a result, they rely heavily on advertising to persuade people to spend their money on the chance of winning. While this may serve a public interest purpose, many of the same concerns that surround privately run lotteries apply to state-run lotteries.
Since New Hampshire initiated the modern era of state lotteries in 1964, states have introduced them in almost every jurisdiction. Their introductions have followed remarkably similar patterns. The arguments for and against them, the structure of the resulting state lotteries, and their operations all bear remarkable similarities.
The main argument for adopting a lottery is that it enables governments to raise revenue without infuriating an anti-tax populace. State governments, which find themselves in constant financial stress and with a growing public resentment towards taxation, are desperate to find ways to bolster their revenues while not triggering a backlash. In this climate, lotteries have become increasingly popular.
However, it is important to note that the popularity of lotteries does not seem to be directly related to a state government’s actual fiscal condition. As Clotfelter and Cook point out, “Lottery popularity seems largely independent of the state’s objective financial health.”
A second, and more controversial, argument for a lottery is that it is an effective way to distribute prizes on a broad basis. Although a lottery is a form of gambling, critics contend that it does not involve the kind of corruption and graft that is typical of most forms of private gambling. Moreover, they argue, it provides a substantial income to disadvantaged groups, including minorities and the poor, which would otherwise be unlikely to participate in any sort of gambling activity.
Despite these criticisms, the vast majority of state governments have adopted a lottery, and they continue to grow in size and complexity. Many state lotteries have formed consortiums that allow them to offer games spanning larger geographical footprints and to carry higher jackpots. The number of different games offered by state lotteries has also increased dramatically.
While a national lottery may be in the works, the majority of state lotteries operate independently. As a result, they are able to attract large numbers of players. These large audiences have created a powerful constituency for the lotteries, which can be expected to exert considerable influence over their policy decisions.
As these powerful interests develop, state-run lotteries can come to work at cross-purposes with the public interest. For instance, by advertising the fact that their profits will be used to promote gambling, state-run lotteries inevitably promote the problem of gambling addiction among some members of the population. This type of promotion can also have negative consequences for the poor, problem gamblers, and their families. In addition, the fact that a large percentage of a state’s revenue comes from lotteries can make it difficult to cut taxes or reduce funding for other programs when the need arises.