The purchase of lottery tickets can’t be accounted for by decision models based on expected value maximization. The ticket costs more than the expected gain, as shown by lottery mathematics, and someone maximizing expected utility would not buy tickets. However, the entertainment value (or other non-monetary value) obtained by playing can make the purchase a rational choice for some individuals.
Lotteries have a long history and are widely used by governments. The first recorded public lotteries were held in the Low Countries in the 15th century to raise funds for town fortifications and help the poor. Lotteries also helped finance the American Revolution, and a variety of state colleges and universities were built using private funds from private lotteries.
In the immediate post-World War II period, many states expanded their social safety nets by launching new lotteries that enabled middle and working class people to have more of the same services enjoyed by the rich without paying onerous taxes. This arrangement collapsed in the 1960s.
Despite this, lotteries remain incredibly popular and have been adopted by numerous countries around the world. It is estimated that worldwide lottery revenues exceed $90 billion per year, and more than half of this sum is generated by the US. While lottery proceeds are a significant source of government revenue, there is no guarantee that winnings will be spent in a responsible manner. Winnings are often subject to various taxes, and when winners choose lump-sum prizes, federal income tax withholdings can significantly reduce their total amount of money after they pay taxes.