The Costs of Running a Lottery

The casting of lots to decide fates and distribute prizes is a long-standing practice, with its roots in ancient times. More recently, state governments have instituted lotteries to generate revenues that are then devoted to public goods such as education. Lotteries enjoy broad popular support, even in the midst of fiscal crisis. However, there is one clear problem with these new forms of government-based gambling: state officials can hardly manage an activity from which they profit without becoming dependent on it.

Many states are now relying on lottery funds to meet their revenue needs and, thereby, are putting the future of public services at risk. This problem is particularly significant in states where lotteries have developed particular constituencies: convenience store owners (who sell the tickets); suppliers to the lotteries (heavy contributions by these firms to political campaigns are routinely reported); teachers (in those states where a portion of lottery proceeds is earmarked for education); and state legislators, who become accustomed to the steady stream of painless revenue.

There is also an increasing tendency to develop more and more complex lottery games, which creates an escalating cost for state officials. This trend is especially evident in those states that have established a lottery monopoly for themselves and have established a state agency to run the lotteries rather than licensing a private firm to run them. The resulting complexity increases the overall costs of running a lottery, as well as the number of different types of games that must be offered.