The Psychology of Lottery Play
The casting of lots has a long history in human affairs—Nero was a big fan—but lottery-style draws that distribute prize money are much more recent. They sprang up in the 1500s in Europe, usually run by towns looking to build defenses or fund charity. The modern practice isn’t confined to any one region, but stretches around the globe. But what is it about the lottery that appeals to people? Why do so many people want to participate, even when the odds of winning are so low? In this week’s cover story, we take a look at the psychology of lottery play, and ask what it says about humanity.
In America, the growth of state lotteries began in the nineteen-sixties. The national economy had begun to grow rapidly, and, for a time, this boom allowed states to expand their services without the need for especially onerous taxation. But, as Cohen explains, by the mid-twentieth century, that arrangement had come to an end. With a growing population and rising inflation, along with the cost of the Vietnam War, the ability for states to balance their budgets quickly began to erode.
As the economy slowed, states turned to the lottery to make up the difference. In this context, lotteries were seen not as a good way to fund public works projects—as they had been in the past—but as a way of making up for shrinking state coffers without raising taxes or cutting services, which would have proved politically impossible. In the early days of American lottery play, a large percentage of winnings were paid out in lump sums, so winners often assumed they would be able to pocket a third of the advertised jackpot amount right away. But the reality, as Cohen points out, is that the one-time payment (cash or stock) that a winner receives is significantly smaller than that figure, after federal and state income taxes have been applied.
This is, in fact, a big reason why winning the lottery can be so demoralizing. Even if you have the highest chances of winning, you’re not going to get close to the advertised jackpot. And that’s not just because the prize is divided among so many winners, but also because of taxes.
Most U.S. lotteries take out 24 percent of the winnings to pay federal taxes. That means that, if you won the big jackpot—in the millions of dollars, let’s say—you’d only be able to keep about half of your prize money. And that’s assuming you don’t decide to invest it, which could cut your final amount by another three or four percent. This is all a little strange to us, because the underlying assumption of lottery play seems so reasonable: that everybody has a chance to win. And that, if you’re lucky, the winnings will be enough to help you live a good life. But, as we’ve seen this week, that’s not necessarily the case. The lottery is a gamble, and it’s one that has a dark underbelly.