Early American Lotteries

Wednesday, May 17, 2017

Given how often I mention my radical opposition to all taxation here, I would be remiss not to mention an interesting piece put out by the Foundation for Economic Education regarding the prevalence of lotteries as a means of government finance in early America. Here's a sample:

Once the colonies won the war, the new states leaned heavily on lotteries to raise revenue, in part because they were not eager to tax newly independent citizens who'd just rebelled against taxation by a central authority. Lotteries funded the growth of the country's earliest colleges, including the College of New Jersey (later Princeton), Dickinson College, Harvard, and Yale, of many, many churches, and of iconic buildings, including Boston's Faneuil Hall, which needed to be rebuilt after it burned down in 1761.
I do not know enough about the subject to offer a definitive opinion, but I am skeptical that the government "ran on" lotteries, as the title states. Government was much smaller and much closer to its proper scope then, but ... just off the top of my head, the saying, "not worth a Continental" comes to mind. And an article about that subject over at the Mises Institute quickly indicates that even if, most of the time, government could have run this way, taxation and inflation were indeed around back then.

As an opponent of taxation, I will reiterate that such a cause is lost without its advocates making principled moral arguments against the practice. Practical considerations, while secondary, are important. This piece says nothing about the former and is weak regarding the latter. First of all, it does not really make the case that the government actually ran on lotteries, as I have already noted. Second, it does not introduce (or re-introduce) a new idea to the modern reader, as its mentions of modern lotteries demonstrate. Third, it fails to note that many of its examples of lotteries as a means of financing such things as universities and public works are things outside the proper scope of government.

It is regarding that third point that the FEE missed a chance to make some minor, but valuable points: It is true that the government (a) should not be involved in these things and should (truly) privatize them, and (b) should consider lotteries for more of its financing. But it is also true that private institutions that have traditionally relied on government funding should consider such means more often than they do now. Lotteries are not just one proper means of financing the government; they are a way entities that should not be funded by the government can fund themselves. That is, lotteries can be a tool for privatization.

That said, the FEE piece is valuable primarily as a pointer to historical information about government finance.

-- CAV


Jim said...

Following the Panic of 1819 and the credit crunch produced by the First Bank of the United States, Thomas Jefferson was oppressed by debts inherited, resulting from the cosigning of another's loan, and from financing investments in privately financed improvements to river navigation.

To resolve this situation so that his family would not be saddled with inherited debt as he had been, Jefferson sought approval from Virginia for a private lottery to pay off his debts. Unfortunately, seeking legislative approval took too long and Jefferson's plan was ruined by the timing of his death.

Details of this effort are recorded in Dumas Malone's _The Sage of Monticello_.

Gus Van Horn said...


Thanks for the interesting historical notes, both on early American central banking and on this attempt at a private lottery.