Lottery is a gambling game in which tickets are sold for a chance to win a prize. It is also the name for any scheme for distributing prizes by chance: to “look upon life as a lottery.” The drawing of lots has a long history in human affairs, including several examples in the Bible, but lottery-like schemes for material gain are of relatively recent origin. Public lotteries began in the Low Countries in the 15th century, and were used to raise money for town fortifications and the poor.
By the time of the American Revolution, private and state-owned lotteries were commonplace in the English colonies and hailed as a painless form of taxation. Benjamin Franklin even sponsored a lottery to raise funds for cannons to defend Philadelphia against the British, but the project was unsuccessful.
Although the odds of winning are extremely low, many people still play the lottery for entertainment or other non-monetary benefits. This article examines the economics of lottery and considers whether it is a rational choice for an individual in a given situation.
Some states require that a percentage of proceeds from the sale of lottery tickets be paid to education or other public purposes. Others allow participants to choose between an annuity payment or a lump sum of cash. While lump sum may be more convenient for many lottery winners, it is likely to yield a lower total amount than the advertised jackpot after income taxes are applied.