Lottery Revenues

The casting of lots to determine ownership and other rights has a long record, including several instances in the Bible. More recently, lottery-style drawings have been used to finance a wide variety of projects and public works, including town fortifications, colleges, and even the building of churches. The first state-sponsored lotteries were held in the Low Countries in the 15th century. The first lottery to offer tickets with prize money was recorded in 1466 at Bruges, although earlier records in Ghent and Utrecht indicate that lotteries had been going on for much longer.

Lotteries are typically state-sponsored games of chance. They require a pool of funds from players, from which all costs and profits must be deducted. The remainder is available for the prizes, which must be large enough to attract players. In most cultures, a percentage is also required for promotional costs and for a fund for the poor.

Proponents argue that lottery revenues provide a source of painless government funding. This argument has a strong appeal to voters who like the idea of paying for their taxes with money that comes from other people’s pockets, and politicians who view lotteries as a way to get tax dollars for free. However, the evidence suggests that lottery revenues usually expand dramatically when they are introduced, then level off and begin to decline. The pattern may be explained by a number of factors, including the reluctance to play among poor and other socially disadvantaged people; by differences in demographics (men tend to play more than women, blacks and Hispanics more than whites); by education levels (lottery play falls with higher levels of education); and by political connections (lottery suppliers make heavy contributions to state political campaigns). A few states have found ways to keep revenues rising longer, but none have succeeded in eliminating peaks and valleys in their lottery revenue curves.