There are elements of this question that must be addressed separately. The Objectivist attitude toward socialism is known, I assume, but even if State lotteries serve a bad political theory, the lottery itself is not therefore to be condemned. It must be evaluated on its own merit.
Winning as opposed to earning goods or money is not wrong. Door-prizes and advertizing give-aways, etc., are not taking the unearned. Gambling is a popular form of entertainment. In games in which skill counts, it is as sensible a from of entertainment as many others. In games of pure chance, the psychological thrill of gambling pays the participant for the cost of the bet. There is nothing wrong with that.
That gambling becomes addictive to some people is not an indictment of gambling. It speaks volumes about the individuals and the culture that revel in gambling, but just as the existence of winos doesn't condemn wine, inveterate gamblers don't indict gambling itself.
A state-run lottery is not a proper function of governments. That is the only ground on which it is to be opposed, though. The implication that people are being taken advantage of by offering fortunes as prizes is predicated on patronizing the individual. Objectivist thinks better of mankind.
There are several concepts and questions buried in this, so I won't try to address them all. First, I question the term "unearned." If someone plays a lottery and wins, they've earned it. Yes, it mostly by luck, but also from their choice and initiative to play the lottery. Objectively speaking, it's not a logical, predictable, or effective way to earn money. So for a particular individual's life I don't think an Objectivist would take it seriously. Maybe as a hobby or recreation, if the "game" brings someone pleasure and they like the thrill and anticipation.
As a means to support funding of the government, I think it's a feasible, creative, and non-coercive mechanism to help fund a government. I thought other free-market economists have recommended or suggested the idea but I can't quote any sources. What that funding goes toward is an entirely different issue.
It might be important to acknowledge what wrote at the beginning--the more rational and intelligent people in a society wouldn't choose to participate. This is why lotteries are often called a Stupid Tax. So it's probably not the most ethical or honorable way to help fund government in an Objectivist society, but it is voluntary, which makes it far superior to coercive taxation in my judgment.
answered Jan 01 '11 at 01:57