The History of the Lottery

The casting of lots has a long history in human societies, but the lottery as an instrument of material gain is of relatively recent origin. The earliest public lottery (as opposed to private) was held by Augustus Caesar to distribute money for municipal repairs in Rome. Since then, the lottery has become a widespread and popular form of public finance. It was used in early America to finance many projects, including paving streets and building wharves, as well as establishing Harvard and Yale universities.

Most state lotteries function much like traditional raffles, where the public buys tickets for a drawing at some future date, often weeks or months away. Revenues typically expand dramatically after the lottery is introduced, but then level off and may even decline, necessitating a steady introduction of new games in order to maintain or increase revenues.

People rationally purchase lottery tickets when the entertainment value or other non-monetary benefits exceed the disutility of the monetary loss. This is a key point, because people tend to have different preferences in terms of the relative importance of these types of benefits.

The lottery has a particular appeal to the people who are most likely to be poor, those in the bottom quintile of the income distribution. These are people who have a few dollars a week left over after paying their rent or mortgage, and the chance to improve their lives by winning some money is alluring.