The lottery is a form of gambling in which participants buy tickets for a chance to win a prize, usually cash. State governments control the lottery industry. Lotteries are a major source of revenue for public services and private enterprises. They are also a popular way to fund education and other social programs. But critics argue that the lottery promotes addictive behavior, constitutes a major regressive tax on low-income groups, and fosters other problems of public policy.
Despite these criticisms, many states have established and operated state lotteries. The introduction of the lottery is a relatively common and predictable process: The state legislates a monopoly; establishes a state agency or public corporation to run the lottery (as opposed to licensing a private firm in exchange for a percentage of profits); begins with a modest number of games; and, under pressure to increase revenues, progressively expands the lottery.
In the United States, there are two main messages that state lotteries rely on to gain and retain broad public support. The first is that people simply like to gamble. The second is that the money lottery proceeds generate for public services and private enterprise is a good thing.
The latter argument is most effective when state governments are facing fiscal stress, such as an imminent threat of raising taxes or cutting government expenditures. But it has also proven successful in times of relative economic stability, as well as during recessions. In fact, as Clotfelter and Cook show, the objective fiscal circumstances of a state do not appear to play a role in its decision whether or when to adopt a lottery.