What is a Lottery?
A lottery is a contest in which people pay money to have a random (and low) chance of winning a prize. The prizes can be cash or goods. The word “lottery” is often used to refer to state-run lotteries that promise large amounts of money to winners, but the term can also describe any contest in which prizes are awarded randomly, including school choice programs.
People have been playing lotteries for centuries. They were common in the Roman Empire (Nero was a big fan), and are attested to throughout the Bible, where they’re used for everything from selecting kings to divining God’s will. In the 18th century, states began to use lotteries to raise money for public works. The idea was that, since people were going to gamble anyway, the government might as well pocket the profits. It was a way of solving budget crises without enraging anti-tax voters.
Unlike most other forms of gambling, the proceeds from lotteries are redirected back to the state and are thus subject to state regulations. Some state lotteries put some of their revenues into support centers for gambling addiction and recovery, while others funnel it into a general fund that addresses things like roadwork, police forces, or other social services. Some states even offer annuities, which spreads out the winnings over time and reduces the risk of blowing it all at once.
Purchasing a lottery ticket cannot be explained by decision models based on expected value maximization, because the tickets cost more than the expected prize, but more general utility functions based on things other than the jackpot can account for it. Lottery purchases may also reflect a desire to experience a thrill or indulge in a fantasy of becoming wealthy.