How Big Is the Lottery Jackpot?


Lottery is an immensely popular form of gambling in the United States, with players spending $80 billion a year on tickets. The games are promoted by state governments as a way to raise money for education or other purposes, and voters and politicians look at them as a source of “painless revenue.” But how much money is really raised, and what kind of societal trade-offs are associated with lottery playing?

The origins of lotteries are ancient. The Old Testament instructs Moses to take a census of the people of Israel and divide land by lot, and Roman emperors gave away property and slaves in a similar manner. A common dinner entertainment in the ancient world was the apophoreta, in which guests would write down their names on pieces of wood, and the host would draw lots for prizes, such as wine or food.

Modern state lotteries, however, are a relatively recent phenomenon. The first modern lotteries began in the Northeast, in states with larger social safety nets, and the primary argument behind their establishment was that the revenue from these new sources would allow states to expand their services without imposing too much of a burden on working class voters. In fact, the initial public reaction to lotteries was often negative: ten states banned them between 1844 and 1859.

After the first state lotteries were established, however, they quickly became extremely popular, and their popularity has continued to grow. Currently, almost all states offer some type of state-run lottery. The majority of state-run lotteries are legalized by statute rather than through private promotion, and they generally follow a similar pattern: the state establishes a monopoly for itself; hires a contractor to run the operation (often in return for large advertising revenues); begins operations with a modest number of relatively simple games; and, under pressure from legislators and the general public, progressively expands the lottery’s size and complexity.

The most important factor in a lottery’s success is the size of its jackpots, which are advertised prominently in ads and on television and radio. These huge sums of money attract the attention of reporters and the public, and they are designed to be newsworthy, in order to drive ticket sales. But there is a problem with this strategy: the jackpots are often paid in equal annual installments over 20 years, which means that the actual value of the prize is significantly diminished by taxes and inflation.

Ultimately, the biggest problem with lotteries is that they deprive citizens of the opportunity to invest their own money in low-risk assets that can generate far greater returns than the risky financial bets they are making with their lottery tickets. In addition, many lottery players are forgoing savings that they could have put toward retirement or college tuition by purchasing lottery tickets. This is a serious trade-off that merits careful consideration. It is worth noting, too, that the vast majority of lottery players are from middle-class neighborhoods, and that there is a correspondingly large disparity in the number of lottery tickets purchased by low-income residents.