The casting of lots to decide matters of fate and material gain has a long record in human history—including several instances mentioned in the Bible. But the modern lottery, in which participants pay a small sum for the chance to win a substantial prize, has only been around since the late twentieth century. Its introduction to the United States, which was prompted by states’ desperate search for budgetary solutions that wouldn’t enrage an increasingly tax-averse public, followed a familiar pattern.
Initially, lotteries were widely used to raise funds for municipal repairs, town fortifications, and helping the poor. The first recorded public lotteries to distribute prizes in the form of money took place in the Low Countries during the 15th century. But it is not until recently that they have become a common source of state revenues.
Although they have long been a popular pastime, lotteries are not without problems. A significant proportion of the total prize pool must be deducted for costs and a percentage normally goes as taxes and profits to the organizers, leaving a smaller amount available for the winners. This leaves the organizers with the challenge of balancing the attraction of large prizes—which tend to attract attention and drive ticket sales but are often more volatile than the average prize—and the desire to provide regular, smaller winners.
In addition, studies suggest that lottery participation is not evenly distributed among all segments of the population. For example, Clotfelter and Cook cite one study that found that “the poor participate in lottery games at levels much less than their percentage of the total population.” This is a problem that can be addressed with greater financial transparency or by limiting prizes to less costly items.