How the Lottery Works


When a lottery advertises a jackpot that sounds huge, it usually doesn’t have that sum sitting in a vault ready to be handed over. Instead, it represents how much you would get if the prize pool was invested in an annuity for three decades: you’d receive a single initial payment, followed by 29 annual payments that increase each year by 5%. If you die before all the annual payments are made, the remaining sum goes to your estate.

This is not the only way that people gamble, but it is one of the most popular, and for good reason: It offers a chance to make money without much risk. Many people who play the lottery will tell you they’re doing it for charity, or to help their children’s education, or whatever else. But the truth is that they’re just gambling for money, and they’re spending a lot of their hard-earned money doing it.

Defending the lottery, its supporters argue that people are going to gamble anyway, so government might as well take advantage of it. This argument is flawed in several ways: First, it ignores the fact that the amount of money that people spend on lottery tickets depends on economic fluctuations. During recessions, when people are worried about losing their jobs, or when unemployment rates rise, or when poverty rates spike, lottery sales tend to increase as well. And, as with all commercial products, lottery advertising is disproportionately visible in neighborhoods that are poor or black or Latino.

Another argument that lottery advocates push is that it’s a great way for states to expand their social safety nets without burdening the middle class or working classes with higher taxes. But that argument is also flawed: Lottery revenue only makes up about 2 percent of state revenues, not nearly enough to offset a reduction in taxes or significantly bolster government expenditures.

Posted in: Gambling