A lottery is an arrangement in which a prize, often money, is awarded by chance to a person or persons who pay for the right to participate. The term also refers to other arrangements in which prizes are allocated by a process that relies on chance, such as those used for military conscription and commercial promotions that involve the giveaway of property. Lottery participants may be paid for their participation in the arrangement, or they may receive nothing at all except for a sense of hope and excitement.
Historically, lotteries have been an important source of state revenue. They have been employed to fund everything from constructing towns and bridges to building universities, churches, and even ships for the exploration of new lands. The early colonies even held lotteries to raise money for wars against Native American tribes, despite strong Protestant prohibitions against gambling. During the seventeenth and eighteenth centuries, lotteries became common in the Netherlands and were hailed as a painless form of taxation.
By the late twentieth century, however, state governments began to face a dilemma that Cohen describes as “the tumult of booming prosperity and shrinking resources.” They were facing the need to balance a wide array of public expenditures, including maintaining social safety nets, investing in infrastructure, and providing educational opportunities for all. At the same time, they were being hammered by voters who resented high taxes and the perception that government was overexpanding.
To deal with this problem, many states turned to the lottery. Lotteries allowed them to generate hundreds of millions of dollars in revenue, essentially out of thin air. In the words of one scholar, they were a “budgetary miracle.” For politicians confronting a dilemma that included the prospect of losing a substantial percentage of their electorate’s votes, the lottery seemed to be a perfect solution.
In a lottery, the prize is usually a lump sum of cash, but can also be other goods or services. In most lotteries, the prize value is the amount of money remaining after expenses, such as the profits for the promoter and the costs of promotion, are deducted from the pool of funds. For a lottery to be legal, participants must pay for the right to participate.
Although rich people do play the lottery (and win some very large jackpots—one of the largest was a quarter billion dollars), they spend far fewer dollars on tickets than the poor. According to consumer financial company Bankrate, players earning fifty thousand dollars or more per year spend, on average, one percent of their income on tickets; those making less than thirty thousand dollars spend thirteen percent.