In a lottery, the prize money is distributed by chance. People can try to increase their odds of winning by playing every possible combination of tickets. But for big national lotteries like Powerball and Mega Millions, it’s nearly impossible to buy enough tickets to cover all the possibilities. One way to do it is by pooling money with other people, a tactic that has been used successfully by several syndicates. [Narrator]
During the fourteen-hundreds, lotteries were common in Europe’s Low Countries, where they were often used to raise funds for town fortifications and charity for the poor. They spread to America along with the European settlement of America, despite strong Protestant prohibitions on gambling and even dice games in private homes. Lotteries were sometimes tangled up with the slave trade, as well; George Washington managed a Virginia lottery that had prizes including human beings, and a formerly enslaved man won a South Carolina prize and went on to foment a slave rebellion.
Cohen traces the modern incarnation of the lottery to the nineteen-sixties, when states facing a fiscal crisis found that raising taxes or cutting services was unpopular with voters. As states searched for solutions to this problem, they came across the lottery’s aversion-free appeal.
It varies by state, but in general a portion of ticket revenue goes toward prizes and another to administrative costs and vendor fees. The rest gets divvied up among projects each state designates. The wealthy, on average, spend one per cent of their income on tickets; the poor, thirteen per cent. But because lotteries are run as businesses and need to maximize revenue, they have to advertise heavily, and that marketing has some very real consequences.