Observe the cash register line at any state lottery agent the days before an unusually large jackpot, and you will get some idea of the popularity of this form of government fundraising. Some call it a state-sponsored vice, and others believe it is a regressive and voluntary tax on the poor. Still millions of people across the United States and around the world line up to play Lotto, Quik-pick, Power Ball, Keno, Quinto, and Pick 3, 4, or 5 and purchase a chance to change their lives.

Though the current wave of lotteries began in the 1960s, the lottery is not a new method for governments to raise money. In the late eighteenth and early nineteenth centuries, it was common for government and other institutions to sell chances to win prize money in order to fund specific civic projects. In the early 1800s, Boston's Faneuil Hall was refurbished with funds raised...