The History of the Lottery


In a lottery, people buy tickets for a drawing in which a prize is offered for guessing the correct numbers. The odds of winning are absurdly low, but the game is very popular. People spend billions playing the lottery each year, and most don’t realize how much their money is going to waste.

The first state-sponsored lotteries were created in Europe in the early sixteenth century, and the word “lottery” dates to the seventeenth century as well. It may be a calque on Middle Dutch loetsche, which means “fate.” The word could also be a euphemism for a tax or public service, as the lottery was seen as a painless form of funding.

While there are many ways to win a lottery, the most common is by matching a set of numbers to those randomly drawn by a machine. The prize is then awarded to the ticket holder, whether it’s cash or goods. Some lotteries have a fixed price per ticket; others have a progressive prize structure where the prize grows as more tickets are sold. The amount of money returned to bettors tends to be between 40 and 60 percent of the total pool.

Most states regulate their lotteries. In some cases, this requires that the lottery’s prizes be proportional to ticket sales; in other cases it sets a minimum prize level and caps the size of the jackpot. In either case, the percentage of prize funds that go toward expenses and profits is deducted from the total pool, leaving the remainder to be distributed to winners. In the United States, state and commercial sponsors contribute a large share of prize funds.

In the early eighteenth century, the practice of running a lottery spread rapidly across England and into America. The American colonies were, as Cohen writes, “defined politically by a deep aversion to taxes,” and lotteries helped subsidize everything from town fortifications to the construction of churches. Even Harvard and Yale were financed in part by lotteries, despite Protestant prohibitions against gambling.

As the popularity of the lottery grew, states adopted more and more regulations. Some restrictions were designed to protect the integrity of the games, while others were intended to control spending by lottery participants. The earliest lottery laws included provisions that banned advertising and barred the sale of tickets to minors. Other laws were aimed at preventing the purchase of multiple tickets or the use of false information to obtain tickets.

The lottery is a complex phenomenon, and one that has been studied in great detail by economists. In general, the economics of the lottery suggest that a player’s utility from buying a ticket is higher than the utility gained from a non-monetary prize, but that this is often offset by the disutility of losing money. For some players, however, the entertainment value of a ticket is enough to offset this negative effect, and they find themselves willing to risk losing money to pursue the dream of a big payout.