The Hidden Costs of Lottery


Lottery is a gambling game in which people purchase tickets for a chance to win a prize based on the number of their chosen numbers matching those selected at random by machines. For some individuals, the entertainment value and other non-monetary benefits of playing could outweigh the negative utility of a monetary loss and make the purchase a rational choice.

The first public lotteries, recorded in the fifteenth century, were held to raise money for town fortifications and for charity. But the lottery’s true rise began in America, in the nineteen-sixties, when state budgets were straining under a growing population and inflation, and an increasing burden on social safety net programs. Creating a balanced budget became difficult without raising taxes or cutting services, and both options were unpopular with voters.

Cohen explains how the modern lottery emerged as a solution, offering states the opportunity to raise revenue without onerous taxation and cut spending by selling tickets that had little or no monetary value. The lottery’s popularity was fueled by the myth that it would float most of a state’s budget, and its proponents were quick to claim that winning a prize in the lottery did not necessarily mean you’d have to pay taxes on your winnings.

But this is a phony promise, and it’s important for individuals to understand the real financial risks of buying tickets and the psychological costs associated with their purchase. In addition to the obvious risks of losing your entire prize, there are hidden costs in the form of higher risk behaviors and attitudes that can lead to problems with gambling.