The Dark Underbelly of the Lottery


The lottery is a process of allocating something (typically money or prizes) among a large group of people by chance. Its popularity is tied to a strong societal belief in meritocracy, the notion that someone who works hard and plays by the rules deserves to be rich. But there is a dark underbelly to this: it’s possible to win the lottery and lose everything. In fact, this is the fate of many lottery winners and it’s why you need to know a little bit about gambling and probability to play responsibly.

Most people who play the lottery don’t go into it with clear eyes. They have all sorts of quote-unquote systems, based on irrational beliefs about lucky numbers and stores and times of day to buy tickets, and they know that the odds are long. But they also believe that the improbable occurrence of winning the lottery will improve their lives.

In order to keep ticket sales robust, state lotteries have to pay out a respectable percentage of their revenue as prize money. This cuts into the percentage of revenue available for things like education, which is the ostensible reason for states to have lotteries in the first place. But this doesn’t seem to make much difference to consumers, as they rarely consider the implicit tax rate on their ticket purchases.

As jackpots grow, they get harder and harder to justify. But what’s more, when you do win the lottery, it will take a while to actually receive your prize, as most jackpots are awarded as an annuity: a lump sum when you win followed by 29 annual payments that increase each year by a predetermined amount.