State lotteries

Lotteries are the descendents of older, informal, private-sector prize systems like "policy wheels" (often run by neighborhood merchants as a way of distributing money people would then use to shop) or numbers games (usually run by organized crime). It wasn't until the 1960s – New Hampshire in 1964, to be specific – that states legalized, and then dove headlong into, the lotto business. The key difference for consumers when control shifted from the black market to the public sector was that the odds got a lot worse and the payoffs got much larger. Oh, and the winners got the honor of paying taxes on their prizes. Yes, lotteries actually got more exploitative when the mob stopped running them. The theory behind state control was and is simple: find a way to boost flagging revenues without taxing people who vote, and since gambling and playing the numbers are going to happen anyway (as Pennsylvania Governor Rendell so animatedly pointed out on TV recently) the state might as well get some tribute out of it. That the same logic could be applied to drugs and other illegal vices escapes most of our elected officials.

Running the Numbers: The Lottery, Part 2