A lottery is an arrangement by which prizes are allocated by a process that relies entirely on chance. It is often used in the case of a competition for something limited and desirable, such as kindergarten admission, a vacant unit in a subsidized housing block, or a vaccine against a fast-moving virus. It is also used to allocate money or other goods and services, such as public welfare benefits, sports event invitations, or job positions in government agencies.
Although the casting of lots for decisions and fates has a long record in human history (including several instances in the Bible), lotteries as organized games of chance for material gain are of rather recent origin. In the 15th century, for example, towns held public lotteries to raise funds for town walls and for helping the poor. During the 1960s, New Hampshire became the first state to establish a state lottery, followed by California, Indiana, Michigan, and South Carolina. Today, more than 30 states have lotteries.
The lottery industry is one of the few in the country that is heavily regulated by federal and state law, with strict advertising and promotion rules and detailed financial reporting requirements. State governments are the principal providers of funding for the lotteries, and the revenue they generate is a major source of funds for many state programs. Lottery profits have even been used to finance major state projects, such as highway construction and education reform.
Most lotteries are privately operated by private companies, but some are run by state governments. The private firms compete with each other and with the state’s own public-works departments to market their products and to sell tickets. State-run lotteries have advantages in some respects, including the ability to target marketing to a specific group of consumers.
A key factor in winning and retaining state approval is the degree to which the proceeds of a lottery are seen as benefiting a specific public good, such as education. This argument is particularly effective when the state’s fiscal condition is weak, as it may reduce opposition to a lottery and ease fears of tax increases or cuts in other programs. But it is not a sufficient basis for approval when the state’s fiscal condition is strong, as it has been in some states where lotteries have been established.
Once a lottery is established, the focus of discussion and criticism shifts from whether the activity is a desirable social goal to the specific features of its operations. The question becomes, for example, how much control should be exercised by lottery officials over the amount and type of games offered and how aggressively they should promote them. It is sometimes argued that the lottery system undermines family values, leads to compulsive gambling, and has a regressive effect on lower-income groups. But these issues are the result of the continuing evolution of the lottery system, not its initial establishment. It is important to remember that, in the early years of a lottery, public policy decisions are made piecemeal and incrementally, with little overall overview.