Categories: Gambling

What is a Lottery?

Lottery is the drawing of lots to determine ownership or other rights. It is documented in many ancient documents, including the Bible, and became common in Europe during the fifteenth and sixteenth centuries. The first state-sanctioned lottery was created in 1612, when James I of England established a lottery to provide funds for the Jamestown colony in Virginia. Lotteries became widely used in colonial America, raising money for towns, wars, colleges and public-works projects. They continued to be popular in the United States after statehood.

Because state-run lotteries are business enterprises with the goal of maximizing revenues, advertising is necessarily targeted at specific constituencies, such as convenience store operators (who typically serve as lottery vendors), lottery suppliers (heavy contributions by these entities to state political campaigns are regularly reported), teachers (in those states where lotteries generate earmarked funds for education) and state legislators (who become accustomed to the large inflows of revenue). Increasingly, critics raise questions about whether running a lottery promotes gambling, which can have negative consequences for poor people and problem gamblers.

Research suggests that the bulk of lottery players and revenues come from middle-income neighborhoods. In contrast, poor people participate in lotteries at much lower rates than do their percentage of the population. While many economists have analyzed the economics of the lottery, it is difficult to argue that lottery purchases are rational according to decision models based on expected utility maximization. This is because the monetary prizes in the lottery are not immediately available to winners; rather, they must be accumulated over time through an annuity that begins with a lump sum payment upon winning and then pays 29 annual payments until the winner dies or forfeits the remainder.

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