In 2021, people in the United States spent upward of $100 billion on lottery tickets, making it the country’s most popular form of gambling. State lotteries promote their games as a painless form of taxation, arguing that the proceeds support everything from education to child welfare. But is that really the case? To get at the truth, we need to look at what makes a person want to buy a ticket.
The first recorded lotteries to offer money as a prize were in the Low Countries in the 15th century, but the practice dates back far earlier. The Old Testament includes references to casting lots for everything from dividing land and deciding inheritances to giving away slaves and property. And the Romans used them as party games during their Saturnalia festivities, distributing tickets to guests who would then choose prizes, often fancy dinnerware.
It’s not just that people like to gamble; we also have a deep desire for instant wealth. But the more we know about how people make these choices, the better we can understand what the lottery is doing and why it’s so popular. To do that, we’ll need to examine both what goes into a person’s “expected utility” when buying a lottery ticket and what the consequences are for society as a whole.
A key component of expected utility is how much a person’s monetary loss will be offset by non-monetary benefits. This is called marginal utility, and it’s why people will sometimes take risks for small rewards—think a lottery ticket or a game of chance. If the non-monetary benefits of winning exceed the disutility of losing the money, the purchase will be a rational choice for that individual.
The lottery provides an excellent example of how marginal utility works in the real world. Let’s consider the case of a lottery game in which one person will win $5 million and another will lose that same amount. The first player’s marginal utility is equal to their current income, while the second player’s marginal utility is equal to zero. Both players will experience a loss from playing the lottery, but that loss will be outweighed by the enjoyment of the entertainment value of the event.
Moreover, because the number of winners in this example is equal for each participant, the lottery is a perfectly efficient way to select a random subset of the larger population. This is the fundamental principle behind methods like random sampling, which are used in science to conduct randomized control tests and blinded experiments.
Despite the fact that people will always prefer to gamble, and that government shouldn’t prevent them from doing so, many have raised ethical concerns over the lottery. These worries, as argued by sociologist Michael Cohen, were not fully persuasive and ultimately fell short of blocking the expansion of state-run gambling in the late-twentieth century. In the end, even staunch antitaxers, such as the residents of New Hampshire, approved a state lottery in 1964.