How Does the Lottery Affect the Economy?

As more states adopt lottery laws, the question of its impact on the economy is a perennial topic. The NASPL recently published statistics on lottery sales by state, including the District of Columbia and Puerto Rico. As of 2003, nine states reported declining sales compared with 2002, with Delaware reporting the sharpest decline at 6.8%. Meanwhile, sales in West Virginia, Florida, and Puerto Rico increased by a combined 27.5% and 21.1%, respectively.


The origins of lottery gambling are uncertain, but the game certainly has a long history. Lotteries were first used by the ancient Egyptians to settle disputes, assign property rights, and fund major government projects. The Romans also practiced lotteries, using them as a way to fund public projects, public works projects, and wars. The word lottery actually comes from the Dutch word for fate. As the practice spread throughout Europe, it was eventually adopted by private organizations and governments to help them finance various projects.

Per capita spending

The Bureau of the Budget director recently updated his report on per capita lottery spending in the U.S., saying that lottery receipts were $550 million in fiscal year 1989. Despite being referred to as “entertainment,” gambling does not fit with our normal patterns of entertainment consumption. While lottery officials describe the games as entertainment, there is no correlation between lottery receipts and per capita spending on entertainment. This is especially true of the lottery.

Impact on state budgets

Many state and local governments depend on the lottery for revenue. However, given the current anti-tax climate, raising taxes is difficult, making this revenue stream a welcome addition. But how does the lottery affect state budgets? It’s not always clear. In Wisconsin, Governor Scott Walker recently requested an additional $3 million for lottery advertising. This amount has varied across state jurisdictions, but a study by the Wisconsin Legislative Fiscal Bureau estimated that the lottery generates $426 in advertising for every $1 spent on it. New York and Massachusetts lottery advertising has been equally successful, producing $79 for every $1 spent on it.

Addiction potential

Research on Lottery addiction potential is limited, mostly focused on European populations. Among those examining the problem, there is a relatively low incidence of problematic lottery gambling. This may be because the activity is socially acceptable and relatively inexpensive. Gamblers may also be unaware of its addictive potential, or it may be a combination of factors. For example, it is hard to tell if someone is prone to addiction because the results are based on retrospective data.