This idea just struck me. It’s so obvious that it probably flies right over most people’s heads.
Lotteries in a free society would not be run by a state monopoly. Anyone could start up a lottery. Right now, the state takes a massive chunk of lottery proceeds for itself. That money could be going into private hands to fund public works and start-up companies. Given the massive wealth thrown around, the creation of lotteries by private citizens could have an enormous effect on resource allocation in a free society.
Hospitals could run lotteries to fund free indigent care clinics. Homeless shelters could run lotteries to fund their operations, and so on and so forth. Imagine if there were thousands of lotteries run by all sorts of people. Assuming you occasionally play the lotto, which lotteries would you play in this environment? Wouldn’t you chose to play only those lotteries that were run by the organizations you wanted to donate your money to? Wouldn’t you only play those lotteries that were run by organizations that were publicly audited and held in high regard?
From now on, if people ask you how the poor will be taken care of in a free society, tell them to go play the lotto.
Wiki leaves us some tantalizing commentary:
Although the English probably first experimented with raffles and similar games of chance, the first recorded official lottery was chartered by Queen Elizabeth I, in the year 1566, and was drawn in 1569. This lottery was designed to raise money for the “reparation of the havens and strength of the Realme, and towardes such other publique good workes.” Each ticket holder won a prize, and the total value of the prizes equalled the money raised. Prizes were in the form of silver plate and other valuable commodities. The lottery was promoted by scrolls posted throughout the country showing sketches of the prizes.
Thus, the lottery money received was an interest free loan to the government during the three years that the tickets (‘without any Blankes’) were sold. In later years, the government sold the lottery ticket rights to brokers, who in turn hired agents and runners to sell them. These brokers eventually became the modern day stockbrokers for various commercial ventures. Most people could not afford the entire cost of a lottery ticket, so the brokers would sell shares in a ticket; this resulted in tickets being issued with a notation such as “Sixteenth” or “Third Class.”
Many private lotteries were held, including raising money for The Virginia Company of London to support its settlement in America at Jamestown. The English State Lottery ran from 1694 until 1826. Thus, the English lotteries ran for over 250 years, until the government, under constant pressure from the opposition in parliament, declared a final lottery in 1826. This lottery was held up to ridicule by contemporary commentators as “the last struggle of the speculators on public credulity for popularity to their last dying lottery.”
It looks like the English state shutdown the private lotteries because they were too effective at funding public works. Lotteries undermine state power by empowering private citizens. If all public works could be funded by lottery, that would leave the state without a purpose. Heaven forbid that happens.
Early America, 1612–1900
An English lottery, authorized by King James I in 1612, granted the Virginia Company of London the right to raise money to help establish settlers in the first permanent English colony at Jamestown, Virginia.
Lotteries in colonial America played a significant part in the financing of both private and public ventures. It has been recorded that more than 200 lotteries were sanctioned between 1744 and 1776, and played a major role in financing roads, libraries, churches, colleges, canals, bridges, etc. In the 1740s, the foundation of Princeton and Columbia Universities was financed by lotteries, as was the University of Pennsylvania by the Academy Lottery in 1755.
During the French and Indian Wars, several colonies used lotteries to help finance fortifications and their local militia. In May 1758, the State of Massachusetts raised money with a lottery for the “Expedition against Canada.”
Benjamin Franklin organized a lottery to raise money to purchase cannon for the defense of Philadelphia. Several of these lotteries offered prizes in the form of “Pieces of Eight.” George Washington’s Mountain Road Lottery in 1768 was unsuccessful, but these rare lottery tickets bearing Washington’s signature became collectors’ items; one example sold for about $15,000 in 2007. Washington was also a manager for Col. Bernard Moore’s “Slave Lottery” in 1769, which advertised land and slaves as prizes in the Virginia Gazette.
At the outset of the Revolutionary War, the Continental Congress used lotteries to raise money to support the Colonial Army. Alexander Hamilton wrote that lotteries should be kept simple, and that “Everybody … will be willing to hazard a trifling sum for the chance of considerable gain … and would prefer a small chance of winning a great deal to a great chance of winning little.” Taxes had never been accepted as a way to raise public funding for projects, and this led to the popular belief that lotteries were a form of hidden tax.
At the end of the Revolutionary War the various states had to resort to lotteries to raise funds for numerous public projects.