Is the Lottery a Waste of Money?


The lottery is the most popular form of gambling in America, and people spend upwards of $100 billion on tickets every year. It’s easy to see why: Buying a ticket is cheap, and it’s fun to dream about hitting the jackpot. It’s also regressive: It hits poor people the hardest, who could use that money for better things. And, according to some researchers, it may be a big waste of money.

In his New York Times article “The Lottery’s Hidden Costs,” the economist Matthew Cohen explains that states originally promoted the lottery as a way to raise revenue without raising taxes. They faced the unpleasant prospect of cutting services if they raised taxes, but if they could make the lottery a revenue generator, they could continue providing their citizens with education, infrastructure, and other necessary public goods. Thus, the lottery became a budgetary miracle. For example, in the early American colonies, which did not have sales or income taxes, colonists viewed it as an opportunity to support their governments without having to pay any taxes at all.

But the state-run lottery was not above taking advantage of people’s addictive personalities and prey on their psychological weaknesses. Its advertising campaigns and marketing strategy were designed to keep people coming back for more, in the same way that tobacco companies and video-game makers exploited the psychology of addiction to sell their products. Similarly, the lottery’s low ticket prices and convenient availability in places like gas stations and convenience stores made it accessible to people who might not otherwise be able to afford to play.

Those who win the lottery usually receive their winnings in either a lump sum or an annuity payment. A lump sum grants immediate cash, while an annuity provides regular monthly payments over a set number of years. The structure of an annuity payment varies from state to state, and can be tailored to suit the winner’s financial goals.

In the twenty-first century, the obsession with imaginable wealth coincided with a decline in the financial security of most working Americans. The gap between rich and poor widened, job security disappeared, health-care costs rose, pensions shrank, and the long-standing national promise that a lifetime of hard work would lead to economic security ceased to be true for many.

The lottery’s popularity reflects that desperation, and it has helped create a society in which the wealthy are more confident than ever that they can maintain their wealth if they buy a few extra tickets. But a little humility is in order. As the wealth gap widens, it’s important to remember that not all of this wealth is created equal, and it can be eroded just as quickly as it was earned. Those who are lucky enough to become very wealthy should be careful to invest their money in ways that improve the lives of those around them. And those who don’t are wasting their time, and their money.