How Does the Lottery Work?


Lottery has become a national pastime for many, and an important source of state revenue. But how it works, and whether the proceeds are actually beneficial to society, are subjects of debate. Lotteries are essentially games of chance in which participants pay a small amount to choose numbers that may be drawn by machines or by the lottery commission, and receive prizes if their chosen numbers match those that are randomly selected. Typically, the prizes are money or goods. In some countries, lotteries also allow citizens to enter a drawing for government-backed services such as healthcare or schooling.

The practice of awarding prizes by lottery can be traced to ancient times. In the Bible, God instructs Moses to divide land by lot, and Roman emperors gave away slaves and property through similar means. Lotteries were popular in colonial America, where they raised money for projects such as paving streets and building churches. George Washington even tried to sponsor a lottery to finance the construction of a road across the Blue Ridge Mountains.

State lotteries have a long history in America, and most modern states now run them. Typically, a lottery is run by a state agency or public corporation rather than licensed to a private firm in exchange for a fee; establishes a monopoly on the production and distribution of tickets; starts operations with a modest number of relatively simple games; and, under pressure to generate revenues, progressively expands its size and complexity, particularly through new types of games such as scratch-off tickets.

One criticism of state lotteries centers on the use of misleading advertising. Critics charge that the ads misrepresent the odds of winning (by inflating the probability and value of prize amounts), encourage compulsive gambling behavior, skew the demographics of players by disproportionately attracting people from lower-income neighborhoods, and generally deceive the public.

But another issue is that the lottery appeals to a peculiarly human psyche, and in particular to our desire for a short-term windfall. The lottery offers the possibility of winning a large sum of money, which can dramatically improve one’s standard of living. It can also offer a feeling of hope and excitement, because there is always a tiny sliver of the possibility that you might win.

Although the purchase of lottery tickets cannot be accounted for by decision models based on expected utility maximization—the ticket costs more than the expected monetary gain—it can make sense under certain conditions. For example, the entertainment value or other non-monetary benefits of the purchase can outweigh the disutility of the monetary loss, and so the purchase is a rational choice for someone maximizing expected utility. Moreover, the purchasing of lottery tickets can be justified by more general models that account for risk-seeking and other behavioral phenomena.