Raising Money Through the Lottery

The lottery is a method of raising money by giving prizes to those who buy tickets. Participants buy tickets with a sequence of numbers and then win if those numbers match the ones randomly selected by a machine. People have been using lotteries to raise funds for many things since the Middle Ages. The first records of a public lottery come from the Low Countries in the 15th century, when towns used them to raise money for town fortifications and poor relief.

State lotteries have often sprung up as the result of pressure from the private sector, but they also reflect an idealism that is more fundamental: that the proceeds from these games can provide a source of revenue to support public services and help reduce taxes for the middle class and working classes. This belief seems particularly true during times of economic stress, when the prospect of tax increases or cuts in public programs can generate political heat and public anxiety. But even in the relatively healthy financial climate of the immediate postwar period, states were able to expand their social safety nets by running lotteries.

Typically, when a state adopts a lottery, it legislates a monopoly for itself and establishes an independent government agency to run the operation (as opposed to licensing a private firm in return for a slice of the profits). Then the operation begins operations with a modest number of relatively simple games and grows by adding new types of games over time. In the short term, revenues can rise dramatically. But they tend to level off and sometimes decline as the novelty wears off, and state officials must introduce new games constantly in order to maintain and increase revenues.

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