National Lottery building located on Paseo de la Reforma in Mexico City.A lottery is a form of gambling which involves the drawing of lots for a prize. The word stems from the Dutch word loterij, which is derived from the noun lot meaning fate or destiny.
Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments. At the beginning of the 20th century, most forms of gambling, including lotteries and sweepstakes, were illegal in many countries, including the U.S.A. and most of Europe. This remained so until after World War II. In the 1960s casinos and lotteries began to appear throughout the world as a means to raise revenue in addition to taxes.
Lotteries come in many formats. The prize can be a fixed amount of cash or goods. In this format there is risk to the organizer if insufficient tickets are sold. More commonly the prize fund will be a fixed percentage of the receipts. A popular form of this is the "50–50" draw where the organizers promise that the prize will be 50% of the revenue. Many recent lotteries allow purchasers to select the numbers on the lottery ticket, resulting in the possibility of multiple winners.
The purchase of lottery tickets is, from the perspective of classical economics, irrational. However, in addition to the chance of winning, the ticket may enable some purchasers to experience a thrill and to indulge in a fantasy of becoming wealthy. If the entertainment value (or other non-monetary value) obtained by playing is high enough for a given individual, then the purchase of a lottery ticket could represent a gain in overall utility. In such a case, the monetary loss could be outweighed by the non-monetary gain, thus making the purchase a rational decision for that individual.
Further reading
- A History of English Lotteries, by John Ashton, London: Leadenhall Press, 1893
- Fortune's Merry Wheel, by John Samuel Ezell, Harvard University Press, 1960.
- Lotteries and Sweepstakes, 1932 by Ewen L'Estrange
- The Lottery Encyclopedia, 1986 by Ron Shelley (NY Public Library)
- Fate's Bookie: How The Lottery Shaped The World by Gary Hicks, History Press, 2009
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