State lotteries in modern America

Jonathan D. Cohen is a historian and director of the American Institutions, Society, and Public Good program at the American Academy of Arts and Sciences.

Below, Jonathan shares 5 key insights from his new book, For a Dollar and a Dream: State Lotteries in Modern America. Listen to the audio version – read by Jonathan himself – in the Next Big Idea app.

1. Lotteries are more popular than you think.

Americans spent about $98 billion on lottery tickets last year. For reference, that’s more than Americans spend on cigarettes, coffee, or smartphones. It’s also more than they spent on video streaming services, concert tickets, books and movie tickets. combined. About half of American adults play the lottery at least once a year, one in four do so at least once a month, and one in eight play at least once a week.

Who exactly is spending all this money on lottery tickets? Americans from almost all walks of life gamble at least occasionally. However, the top 20% of players account for up to 80% of lottery sales. Compared to the general population, this group is disproportionately black or Latino, male, without a high school diploma, and below the income twentieth.

On the surface, this seems to confirm the old adage that a lottery is a “dumb tax” or even a “tax on people who are bad at math”.

2. Many Americans consider the long odds of a jackpot their best chance to start a new life.

Some lottery players mistakenly believe they are due to a massive windfall. But it is wrong to attribute the popularity of lotteries to players’ misunderstanding of odds.

Lotteries are popular largely because the traditional economy does not offer enough opportunities to move forward. In the late 20th century, as lotteries spread across the country and became a weekly purchase for millions of households, upward mobility rates stagnated. High-paying manufacturing jobs disappeared and high-growth industries became increasingly concentrated in certain regions of the country. Many Americans have found themselves excluded from the American dream and the possibility of financial stability.

“The size of today’s jackpots also reflects the standards of wealth in today’s society.”

Many people have turned to lotteries instead. In a 2006 survey, nearly 40% of households with incomes under $25,000 believed their best way to amass a big fortune was through the lottery. A 2010 poll asked respondents to name the most likely way they would get rich; almost as many people chose the lottery as they said they would get rich by starting their own business or getting a high-paying job. During periods of economic decline, casino and horse racing revenues typically drop. Meanwhile, lottery sales increase as incomes fall, unemployment rises and poverty rates rise.

The size of today’s jackpots also reflects the standards of wealth in today’s society. As the rich got richer, the amount of money needed to achieve “the good life” increased. Success no longer meant a suburban house with a white picket fence, but a mansion with a few sports cars in the driveway. It was the kind of wealth that apparently only a lottery jackpot could provide.

“We are selling hope in this depressed economy,” an Ohio lottery official explained. “We do not sell lottery tickets. We sell dreams.”

3. Many players don’t just play to win, they play for the chance to dream.

For anyone who doesn’t play the lottery, the call may seem disconcerting. Why would someone spend hundreds or thousands of dollars a year on what amounts to scraps of paper with a bunch of worthless numbers or symbols printed on them? Lottery tickets seem like lousy forms of entertainment compared to a movie ticket.

My conversations with lottery players across the country reveal that when people buy tickets, especially for big jackpot games, they are really buying the chance to imagine what they would do if they won. For a few minutes, a few hours or a few days, this ticket allows you to fantasize and imagine dreams that come true. The lottery is a vehicle of escape for many people. Lotteries can serve as an escape in a world where the biggest problem is having too much money, not too little. For those who see few opportunities for a better life through hard work or entrepreneurship, those dreams are something they are happy to pay for.

Playing the lottery “is all about the possibility of financial prosperity or abundance,” one Georgian gambler told me. “It’s all about hope.”

4. Players aren’t the only ones turning to gambling in hopes of hitting the jackpot.

Like gamblers hoping for payout, states have legalized lotteries trying to hit their own jackpot. Between 1963 and 2018, voters and policymakers in 45 states bet on the bets. They embraced lotteries because they believed gambling offered a way to fund public services without imposing new taxes.

“Despite decades of disappointment, hopes for a tax-free jackpot not only endured, but paved the way for other forms of gambling.”

As post-World War II prosperity evaporated, states needed more money. Reluctant to pay more taxes, voters and legislators of nearly every political persuasion have been seduced by the prospect of tax-free gambling revenue.

Over time, hopes of lottery revenue gradually dwindled. In the 1960s, lotteries were seen as a balm for entire state budgets. When revenue expectations proved too high in the 1980s, they were presented as a solution for a single budget area, such as education or public parks. It also turned out to be too ambitious. In the 1990s, lotteries arrived in southern states, driven by the promise of funding specific programs, such as a college scholarship or preschool.

In just 30 years, lotteries have gone from being a fiscal panacea to being a funder of a one-state program.

States stayed all-in. Despite decades of disappointment, hopes of a tax-free jackpot not only endured, but paved the way for other forms of gambling. More recently, sports betting has attracted a whole new generation of lawmakers with the promise a tax-free income jackpot.

5. Most of the money does not go to popular public programs.

In one of my favorite lottery commercials, unsuspecting New Yorkers buying a lottery ticket are greeted by a small child, then a choir full of happy children, all thanking them for their purchase. This is the perception that national lottery commissions want to create: that playing the lottery is a good deed. The idea is that even if you don’t win, you should feel good playing because public lotteries are good.

The problem is that lotteries do a lot less good than people think. Last year, for every dollar spent on lottery tickets, an average of 29% returned to the state beneficiary. About half of the money, in some states up to 70%, goes to prizes.

“Most players seem fine with less money for state, more money for prize money and less chance of winning.”

States used to have a much bigger cut, but over the years players have come to expect bigger and bigger jackpots. Huge jackpots are only possible by reducing the amount that goes to the state or by reducing the chances of winning.

States know that their advertising cannot promise a bargain because that would quickly leave them with millions of disappointed and impatient bettors. Instead, they focus as much as they can on the social good they are doing. Their posts always focus on how much they have given to the state, without putting that number in the context of total tax revenue. Lotteries typically represent only 3% of the state’s total revenue.

For their part, most players seem fine with less money for state, more money for prizes, and less chance of winning. After all, it’s hard to tell the difference between a 1 in 3 million, 1 in 30 million or 1 in 300 million chance of hitting a jackpot. It’s easy to see the difference between earning $30 million, $300 million, or $1.3 billion, though. The state cut was down in hopes of keeping players interested. Like most lottery players, state officials spent decades hoping for what they believed to be an inevitable lottery bonanza. Their unshakeable hope is for a jackpot that, against all odds, will arrive one day soon.

To listen to the audio read by author Jonathan D. Cohen, download the Next Big Idea app today:

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