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In colonial America, Cohen writes, lotteries played a crucial role in financing everything from roads to canals to churches to libraries to colleges. They were particularly popular with an era defined politically by an aversion to taxation, and helped pay for the Revolutionary War as well as local militias.
Lottery prizes could be fixed sums of cash or goods or, more commonly, a percentage of total receipts. The latter format was a more secure source of revenue, but it also put the prize fund at risk if ticket sales did not meet expectations.
In the late nineteen-sixties, as the cost of welfare and social services began to escalate and the national economy grew rapidly, state finances came under stress. Increasingly, politicians faced the choice of raising taxes or cutting programs—both unpopular with voters. To avoid the worst of that dilemma, they turned to the lottery.
The first modern state-run lottery was launched in 1964, in New Hampshire, and the rest of the nation soon followed suit. As the number of lottery games increased, jackpots grew to seemingly newsworthy amounts, and that drove ticket sales. It was, Cohen writes, “a fiscal miracle—a way for states to make hundreds of millions appear out of thin air without imposing taxes.” As with all government-run enterprises, however, there was always a shadow lurking over the lottery. “Lotteries are a form of gambling, and for many people the word carries connotations of immorality and corruption,” Matheson says.