Lottery is a form of gambling where participants pay small amounts for the chance to win large cash prizes. The term lottery is also used to describe other forms of random selection for important events, such as unit allocations in subsidized housing, kindergarten placements, and other government decisions. These types of lottery-like games are sometimes called a “social lottery.”
While the drawing of lots to decide ownership and other rights has a long history (including several instances in the Bible), state lotteries — where players pay a little money for the chance to win big – are much more recent. New Hampshire pioneered the first state lottery in 1964, and the game quickly spread to other states.
One of the most common arguments for state lotteries is that they allow governments to raise money without raising taxes on their citizens, especially those in middle and lower income brackets. This was the prevailing view at the time that led to state lotteries being introduced in the immediate post-World War II period, when many Americans believed that states needed additional revenue to expand their social safety nets and pay for other public projects.
But is the lottery really a good source of painless revenue? A closer look at the data suggests otherwise. Using a spreadsheet program, the authors show that the vast majority of players and state revenues come from middle-income neighborhoods, with far fewer from high- or low-income areas. The fact that the middle-income group is the bulk of the lottery’s revenue stream has implications beyond simply funding state programs. It also signals that the lottery has a profound effect on socioeconomic inequality.