Lottery Commissions and the Regressivity of Lottery

Lottery is a way for governments and charities to raise money by selling tickets with different numbers on them. The numbers are drawn at random and the winners get prizes. The casting of lots to make decisions or to determine fate has a long history in human culture and dozens of examples can be found in the Bible. But a lottery, in which tickets are sold to win money, is more recent. Its popularity as a painless form of taxation has made it an instrument of government in most modern countries.

Buying a lottery ticket cannot be accounted for by decision models based on expected value maximization. The price of a ticket is higher than the expected gain, and a person who maximizes expected utility would not buy one. However, people often buy tickets anyway, perhaps because they do not understand the mathematics or because they enjoy the thrill of a trifling risk and the fantasy of becoming wealthy.

Most of the ticket sales come from the 21st through 60th percentile of income distribution, which means that many people playing the lottery have a couple of dollars in discretionary spending but few opportunities to achieve the American dream or for entrepreneurship, and they are willing to put those dollars into a game that has a low probability of winning. The message from lottery commissions is that playing the lottery is fun and a part of life, but it also obscures the regressivity of the lottery and the way in which it offers an unrealistic hope of instant riches to those who can least afford it.