The Cost-To-Utility Ratio of the Lottery


In 2021 Americans spent more than $100 billion on lottery tickets, making it the most popular form of gambling in the country. States promote the lottery as a way to raise revenue — but just how much those ticket sales contribute to overall state budgets is debatable, and the cost-to-utility ratio for players is often unfavorable.

Lotteries are a form of chance drawing for prizes, and their history goes back centuries. The Old Testament instructed Moses to divide property and slaves by lot, and the practice became common in Europe in the fifteenth and sixteenth centuries. Lotteries were brought to the United States by British colonists in 1612.

The basic elements of a lottery are the identity of the bettors, the amounts staked, and a method of selection for winning. The drawing may take the form of a pool or collection of tickets or their counterfoils that are thoroughly mixed before being retrieved and then selected by some mechanism, such as shaking or tossing; computers have become increasingly useful in this task because they can quickly store information about large numbers of tickets and generate random selections for each draw.

Potential bettors are attracted to the prospect of a large prize, which drives lottery sales and earns the games lots of free publicity in news reports. But the disutility of a monetary loss must be outweighed by a combination of entertainment and other non-monetary benefits for a purchase to make sense for an individual.