Reuven Brenner — Lottery can end homes crisis

Using a lottery to solve a big financial mess may seem surprising today, and misguided puritans - who have no clue about gambling and the "betting human nature" - may object. But lotteries financed some of the biggest, most prestigious projects that still survive around the world.

Revenues from them financed the reconstruction of Rome after Nero burned it down; provided funds for military infrastructure such as the Great Wall of China; financed settlements in the New World, like the Virginia Company; financed the British Museum, the Westminster Bridge, many of England's wars.

Last but not least, Yale, Harvard Princeton, and the University of Pennsylvania were all initially financed by lotteries - though their economics departments today are infested with academics writing endless models and recommending policies based upon them, all drawing on a view of human nature which precludes all gambling, considering buying lotteries "irrational" (since such acts preclude finding internal solutions to some cherished "general equilibrium models", where there is no uncertainty, no financing of risk taking, no governments, no wars - well, nothing that identifies humans).

Yet, throughout history there have only been four methods of voluntary exchange: barter, gift, monetary exchange and, indeed, gambling. Sometimes gambling worked best: which may well be the case today as a potential remedy for settling the housing problem in the US. This prospect is better than either using eminent domain or pursuing monetary policies to boost housing and other asset prices.

Read it at Asia Times Online
Lottery can end homes crisis
By Reuven Brenner, Repap Chair at McGill University's Desautels Faculty of Management, and serves on the Board and Investment Committee of its Pension Fund. The article draws on his World of Chance (Cambridge, 2008, co-authored by Gabrielle Brenner and Aaron Brown) and History - the Human Gamble (Chicago, 1983)