The Regressive Nature of Lottery


Lottery is a form of gambling where people pay a small amount of money to have a chance at winning a large sum of money, often millions of dollars. People buy tickets and winners are chosen through a random drawing. Lotteries are sometimes organized by governments and a portion of the profits are given to good causes.

People in the 21st through 60th percentile of income spend a large share of their discretionary income buying lottery tickets. They do this despite knowing that they have only a tiny, improbable chance of winning, and even that if they did win there would be huge tax implications. What these lottery players are really buying is a few minutes, hours or days to dream and imagine that they will be rich someday. This hope, as irrational and mathematically impossible as it may be, provides a positive utility.

But there are other ways to buy dreams, and a much better way to spend discretionary income. Instead of buying a ticket, you could use the money to build an emergency fund or pay off credit card debt. You might also invest in a business or save for retirement. Or you might choose to spend it on a vacation with family or friends. Regardless, it is important to understand the regressive nature of the lottery so that you can make an informed choice about how you spend your money.