Gambling and the Lottery


The lottery is the most popular form of gambling in America. People spend more than $80 billion a year buying tickets and hoping for the best. The big prize money lures people from all walks of life. But the odds of winning are extremely long and most people who win go bankrupt within a few years.

Lottery advertising says “even if you don’t win, you can feel good because the money you buy a ticket with goes to a good cause.” But when it comes to state revenue, that claim is misleading. Lottery revenues are not transparent and consumers don’t realize they’re paying a hidden tax. In addition to paying out prize money, lottery revenues cover operating expenses and advertising costs. Usually, only a small percentage of the proceeds is left over for state governments to spend on things like education.

People who play the lottery do it because they like to gamble. And it’s true that some numbers, like 7, come up more often than others. But that’s just random chance and doesn’t mean anyone has a better or worse chance of winning.

The purchase of lottery tickets cannot be accounted for by decision models that maximize expected value because the cost of the ticket is higher than the expected reward. However, more general models based on utility functions defined on things other than lottery outcomes can account for this behavior. Those who play the lottery are also likely to be lower-income, less educated, and nonwhite.