The odds of winning the lottery are a lot worse than you might think. Yet every year millions of people play it, spending billions and putting their hopes and dreams on the line for an improbable payoff. The big question, of course, is why? Some of it is just pure, unadulterated gambling. But there’s something else going on here, too. Lotteries are dangling the dream of instant riches in an age of inequality and limited social mobility. And many of us find ourselves drawn to them, even though we know that we’re not likely to win.
The lottery’s roots are ancient. The practice goes back at least to the Old Testament, where Moses was instructed to take a census of Israel and divide up the land by lot. Roman emperors used it to give away property and slaves. It was later brought to the United States by British colonists, and while many at first condemned it, by the nineteenth century public lotteries were widespread.
They began as “budgetary miracles, Cohen argues,” the chance for state governments to make money appear seemingly out of thin air, and therefore avoid a very unpopular choice: raising taxes or cutting services. In the immediate post-World War II period, states were expanding their array of services, but with a population that was rapidly growing and inflation that was rising ever higher, balancing the budget became increasingly difficult.
By the fourteen-hundreds, the Low Countries were holding public lotteries to raise money for town fortifications and charity for the poor. Tickets were sold for ten shillings each, an expensive sum even in those days. But they were also a get-out-of-jail-free card, granting participants immunity from arrest for all but certain crimes like piracy, murder, and treason.
Today, the average prize is much smaller, but the same basic principles still apply. The more improbable the chances of winning, the more people want to play, as evidenced by the fact that ticket sales have skyrocketed since 1964 when New Hampshire became the first state to hold a lottery. It’s a bit counterintuitive, but it makes sense: the longer the shot of winning, the more people are willing to put up the price of the tickets in order to increase their chances.
Lotteries, then, are a great example of something that sounds simple but is actually very complicated. They’re not just a game of chance, but a complex combination of irrational human behavior and state policy. And for those who manage to beat the odds and win, there’s a whole lot of personal finance 101 that they have to learn about: how to budget their income, where to invest it, how to set up a robust emergency fund. And there are plenty of former winners who serve as cautionary tales on the psychological toll that sudden wealth can take. But if you’re smart about it, the lottery can be a fun way to spend your money. Just be prepared to lose it all, too.