Public Policy and the Lottery


In the United States alone, people spend billions buying lottery tickets every year. It’s one of the largest and most profitable business models in the world. It’s also an example of public policy that is subject to continuous evolution.

The use of lotteries to make decisions and determine fates has a long history, including several references in the Bible. But the modern lottery, which involves paying a fee for a chance to win money or other prizes, is much newer. It was first popularized in the Low Countries in the 15th century, although evidence of privately organized lotteries goes back two centuries earlier.

State lotteries typically follow similar trajectories: the government legislates a monopoly for itself; establishes an agency or public corporation to run the lottery (as opposed to licensing private promoters); begins operations with a small number of relatively simple games; and, under the pressure of continual revenue growth, progressively expands its offerings with new games and larger prize amounts. This is a classic case of the piecemeal nature of public policy, in which specific issues are given priority over overall policies.

In addition, lottery revenues are highly correlated to the economy, and the industry is vulnerable to fluctuations in the business cycle. This is especially true when governments subsidize the industry with taxpayer dollars, as they do in the United States. Those taxpayer dollars must be repaid, and they will be repaid only when the economy is growing and lottery ticket sales are high.