How the Lottery Industry Benefits Governments

Despite the best efforts of critics, lotteries remain a popular and profitable form of state-sponsored gambling. But the way they’re run—as private businesses with a primary goal of maximizing revenues—can lead to some undesirable consequences for poor people and problem gamblers. And in an era of anti-tax activism, the ability of governments at all levels to profit from a form of gambling that avoids direct taxes is raising some eyebrows.

The modern lottery is an industry of many parts, and it’s not just a game of chance: Ticket sales must cover administrative costs, a percentage goes to the prize fund, and additional funds are deducted for advertising, prizes, and other expenses. The remainder is available for the winners. Some states also earmark some portion of the prize pool for specific purposes, like education. The result is that lottery proceeds are a major source of revenue for many state governments, especially in an era when few people want to pay higher taxes.

In its earliest forms, the lottery was little more than a traditional raffle. Players would buy tickets for a future drawing, often weeks or months away. Prizes might be a variety of goods, from fancy dinnerware to land and slaves. The earliest records of European lotteries are from the Roman Empire, where they were used to distribute gifts at lavish banquets.

By the 1700s, lottery games were a common feature of life in America and Europe. The founding fathers, including Benjamin Franklin and John Hancock, ran lotteries to fund the construction of Boston’s Faneuil Hall and other civic buildings. And while Puritans viewed gambling as “a dishonor to God,” the lottery proved a door and window to worse sins.

Although the popularity of the lottery is sometimes influenced by a state’s actual fiscal health, it generally wins broad approval based on its purported benefits to society. This is a particularly effective argument during periods of economic distress, when state governments might have to raise taxes or cut public programs to balance budgets.

The success of the lottery also depends on a dedicated group of users: convenience store owners (who are accustomed to selling tickets); lottery suppliers (heavy contributions from these companies to state political campaigns are frequently reported); teachers in those states where a share of the proceeds is earmarked for education; and, of course, state legislators themselves.

For the average player, the big challenge is choosing a winning combination of numbers. Choosing a sequence such as birthdays or ages increases your odds of winning, but it also means sharing the prize with anyone who had the same numbers. Harvard statistics professor Mark Glickman recommends buying Quick Picks instead, which combine all the possible combinations. If you must choose your own numbers, he suggests using significant dates and numbers that other people have chosen, such as their children’s ages or birthdays. This increases your chances of having a unique set of numbers. Alternatively, try picking a set of random numbers.

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