The word “lottery” is said to have originated from the Dutch word for “fate” or “chance.” Indeed, lotteries, despite the near certainty of losing, offer the tantalizing prospect of winning a life-changing sum of money. Although the asymmetry in the expected rate of return on investment is one of the realistic characteristics of lotteries, this imbalance might actually be one of the things that makes lotteries so appealing.
The origins of lotteries can be traced back to ancient civilizations, where they seem to have taken the form of raffles used for funding public works and as a form of entertainment.
* Ancient China (around 200 BC):
During the Qin Dynasty, a lottery called the “White Pigeon Lottery” was conducted using wooden tokens, and the proceeds were reportedly used to fund the construction of the Great Wall of China.
* Ancient Rome (around 100 BC):
Emperor Augustus apparently held raffles with prizes as entertainment at banquets attended by nobles and Roman citizens, in order to raise funds for public works.
From the Middle Ages to the modern era, lotteries became a means for governments in various countries to raise public funds.
* Belgium (15th century):
The first large-scale, modern lottery is said to have originated in Bruges, Belgium, in 1441, as a way to fund the reconstruction of the city after the devastation caused by rebellions against heavy taxation, including the repair of the city walls and the construction of hospitals. A public drawing was held in the town square, offering various positions, cash prizes, and other rewards, and many citizens participated.
Since then, lotteries have functioned in countries around the world as a source of revenue that can be collected without being disliked like taxes.
* Italy (15th century):
The first official lottery was held in Milan in 1449, and it subsequently spread throughout Europe. Incidentally, it is said that the construction of the Trevi Fountain, which was renovated under the orders of Pope Clement XII and completed in 1762, was funded by lottery proceeds. Because it was sponsored by the Pope, many ordinary citizens reportedly practiced extreme frugality to purchase tickets in the hope of receiving blessings.
* Netherlands (17th century):
In 1726, the world’s oldest state-sponsored lottery, the “Dutch National Lottery,” was established and is still in operation today.
* America (18th century):
In 1776, Benjamin Franklin held a lottery to fund the American Revolutionary War, and later lotteries were used as a source of funding for public works and the construction of universities such as Harvard University.
* Great Britain (17th-18th centuries):
The initial operating funds of the Virginia Company, a colonial company in North America (early 17th century), the establishment of the British Museum (18th century), and even the purchase of the collection of Hans Sloane, known for inventing chocolate milk, are all said to have been financed by government-sanctioned public lotteries. However, lottery-related crimes and the frenzy surrounding lotteries became so severe that a law prohibiting the sale of lotteries in England was passed in 1823.
* Japan (17th or 16th century):
Its origins are believed to be in Tomie (富会), which started around 1624 (some sources suggest 1575) at Takianji Temple (瀧安寺) on Mount Mino in Settsu Province (摂津国箕面山, present-day Osaka Prefecture). During the first seven days of the New Year, people would visit the temple, write their names on wooden tokens, and place them in a box. On the seventh day, three winners were selected by piercing the tokens with an awl, and they were given lucky charms.
Those who obtained this sacred amulet from the purification ceremony were said to have carried it straight home without any detours, even if it meant staying up all night or having several people take turns carrying it. This was because it was believed that if they stopped to stay overnight or visited another house along the way, the good fortune would remain in that house.
Tomikuji generally refers to lotteries issued independently by temples and shrines, with the proceeds used for repair costs and operating funds. In Edo at the time, it is said that over 30 temples and shrines served as venues, holding 120 lotteries a year. However, the three temples and shrines known as the “Three Great Tomikuji of Edo (江戸三富)” were particularly popular due to their high prize money, winning odds, and convenient locations. These three also provided their grounds as venues for other temples and shrines to hold lotteries, and it is said that lotteries were held about once a month. The method of drawing lots involved using wooden or paper slips, and it is said to have been very fair and transparent. Furthermore, since Tomikuji’s profits at the time were reportedly around 10-15% of sales, it can be inferred that the amount returned to customers was greater than it is today.
* Yanaka Kanno-ji Temple (谷中感応寺)
* Meguro Fudo-son (目黒不動尊)
* Yushima Tenjin (湯島天神)
However, as the highly speculative Tomikuji (富くじ) lottery, which used money as prizes, gradually became popular, the Edo shogunate issued a ban in 1692, except for Gomentomi (御免富), which was only permitted for fundraising for the repair costs of temples and shrines.
The origins of Gomentomi (official lottery) are said to date back to 1730, when the eighth shogun, Tokugawa Yoshimune (徳川吉宗), officially authorized Tomikuji on the condition that the proceeds be used for the restoration of Ninna-ji Temple (仁和寺). This system, which prioritized practical benefits over public morals, was reportedly operated under the strict supervision of the temple and shrine magistrates.
* Clarification of Purpose:
Temples and shrines holding the lottery were required to submit prior applications detailing the purpose of the restoration and their financial plans.
* Restriction of Location:
Both the sale of tickets and the drawing of lots were restricted to the grounds of the authorized temples and shrines.
* Fair Drawing:
Officials were present at the lottery drawing (“Tomitsuki”) to strictly monitor and prevent any irregularities.
In this way, by guaranteeing fairness, the government ensured that the lottery became a trustworthy system accepted by society.
Tomifuda (富札, lottery tickets) were very expensive, costing several thousand yen to approximately 33,000 yen per ticket in today’s currency. However, common people are said to have participated by using a system of joint purchase called “warifuda” (割札, split tickets). The top prize was 1000 ryo (approximately 700 ryo after taxes). Considering that 200 ryo was enough to buy a shop at that time, it’s clear that this was a very large prize.
However, the high price of Gomentomi tickets led to the proliferation of illegal black markets. The prevalence of unofficial lotteries (隠富, kakushitomi) and lotteries that piggybacked on official results (影富, kagetomi) led to serious social problems, including bankruptcies caused by excessive gambling addiction.
Later, during the Tenpo Great Famine (天保大飢饉, 1833-1839), which caused widespread poverty due to crop failures and soaring prices due to shortages, resulting in countless deaths from starvation, Mizuno Tadakuni (水野忠邦), the senior councilor (老中) who led the relief efforts, implemented the Tenpo Reforms (天保の改革, 1839) to restore finances and control prices. As part of these reforms, he also banned Gomentomi (1842).
The main reasons for the ban are:
1. Excessive competition due to the increase in the number of licensed temples and shrines.
2. The increasing complexity of vested interests.
3. Moral concerns that gambling spirits undermines the work ethic.
For 103 years thereafter, the sale of lotteries was prohibited, but in July 1945, the government launched the “Kachifuda” (勝札, winning tickets) lottery, selling tickets for 10 yen each with a first prize of 100,000 yen, in an attempt to absorb excess purchasing power and raise funds for the war effort. However, due to Japan’s defeat in the war ten days before the draw, it was derisively called “Makefuda” (負札, losing ticket).
After the war, Japan immediately entered a period of post-war turmoil accompanied by severe inflation. Therefore, the government revived the first government-sponsored lottery under the name “Takarakuji” (宝くじ, Treasure Lottery) to absorb excess purchasing power, prevent inflation, and raise funds for the reconstruction of war-damaged areas.
The following year (1946), to raise reconstruction funds for local governments, each prefecture was allowed to sell its own lottery tickets. The Fukui Prefecture Reconstruction Lottery (福井県復興宝, commonly known as Fukufuku-kuji) was the first to be launched. In 1954, the government lottery was abolished, and only the “Jichi Takarakuji” (自治宝くじ, local government lottery) remained, continuing to this day.
In the 19th and 20th centuries, lotteries were abolished in various places, not only in the UK and Japan, due to concerns about the negative impacts of gambling, such as decreased work ethic and bankruptcy caused by addiction, as well as an increase in illegal lotteries, fraud, and rigged drawings.
* Germany:
The sentiment that lotteries were a socially dangerous form of gambling strengthened in the 19th century, and the ban on lotteries (with some exceptions) in 1872 is said to have led to a decline in lottery enthusiasm.
* France:
Lotteries were banned after the French Revolution (1789), revived by Napoleon, but then abolished again in 1836 (with some exceptions).
* China:
Lotteries were banned in 1886, but seem to have continued on a small scale. When the People’s Republic of China was established in 1949, all forms of gambling and lotteries were reportedly banned.
* United States:
Except for Louisiana, where gambling organizations controlled the legislature, lotteries were gradually abolished state by state, and finally banned nationwide by the federal government in 1892.
However, the appeal of lotteries as a source of revenue or a means of exploitation proved irresistible to the ruling class. Thus, just as lotteries were revived in Japan shortly before the end of World War II, the expansion of government budgets due to the expansion of state functions and the need to finance the war led to the revival of lotteries in various countries during World War I, and this trend further accelerated during and after World War II. For example, in the United Kingdom, lotteries were legalized with the enactment of the Gambling and Lotteries Act in 1934, and in the United States, they were revived in 1964, with lotteries gradually becoming available in each state. In the People’s Republic of China, officially sanctioned lotteries were launched in 1987.
Incidentally, the expected value of lotteries in many countries is capped at around 50%, meaning that the state or local government, which acts as the bookmaker, sets the odds to ensure they do not lose money.
Whether it’s the Tomikuji of the Edo period or the lotteries of various countries, they represent a social system that integrates finance, the management of temples and shrines, and popular culture, and in a sense, they can be considered a precursor to crowdfunding.
Furthermore, for ordinary people at the lower end of the class system, it represented a glimmer of hope for striking it rich, while also providing a modest sense of satisfaction through indirect contributions to temple restoration and public works. However, at the same time, it has given rise to social problems such as gambling addiction and black markets.
In short, the system that combines a just cause (funding for public works) and a return (prize money) possesses both effectiveness and danger, and has been passed down to modern society.
In fact, historically, in most countries, lotteries have been considered a special-purpose tax to raise funds for specific purposes, and this remains true today. However, the reason why people play the lottery, a gamble where the odds are stacked against them and over 50% of the money is taken as commission, is said to be because of the high maximum prize money and the possibility of winning a large sum, thereby potentially achieving a higher status than their current situation.
To put it another way, it seems that the lottery is not merely a financial product, but also a psychological pleasure device that provides temporary hope, escapism, short-term rewards, and social validation, and these factors contribute to its purchase.
Here are some possible psychological factors that might explain why people are fascinated by lotteries, listed off the top of my head.
1. By viewing it as a ritual of buying hope rather than gambling, positive fantasies enhance happiness.
* From the moment of purchase until the announcement of the winning numbers, the hope, imagination, and dreams of “what if” possibilities create a feeling of pleasure. (Imaginative Reward)
* The human brain doesn’t distinguish between reality and imagination, and the secretion of happiness hormones (dopamine) is triggered, inducing excitement and anticipation until the draw.
* It provides pleasure and happiness as a form of escapism. (Salvation Fantasy)
* People tend to ignore the “unreality” inherent in extremely small probabilities. (Probability Neglect)
2. The influence of cognitive biases, such as representativeness bias and optimism bias, which lead to cognitive distortions.
* People tend to imagine positive outcomes rather than negative ones when faced with an uncertain future, leading to a hopeful bias that they might win.
* Having fortunate events or lucky occurrences makes one feel like they are more likely to win.
* Believing that certain choices can influence the outcome induces unfounded confidence. (illusion of control)
3. Low-probability, high-reward type rewards strongly stimulate the internal reward system.
* The expectation of aiming for a huge return on a small investment.
* It doesn’t hurt to lose, but winning would change one’s life.
* The great appeal based on imbalance. Regardless of the reality of the asymmetry of expected value relative to the investment amount, the appeal of being able to obtain a big dream with a small amount of money is stimulated.
* A psychological phenomenon where people cling to the initial information they focused on, such as the large prize money, and their subsequent judgments are heavily influenced by it, leading them to mistakenly believe that winning is certain. (Anchoring effect)
4. Social Proof and Conformity Effect.
* A psychological tendency to decide one’s own actions based on the actions and opinions of others. (Social Proof)
* The tendency to gather only information that supports a hypothesis and ignore information that contradicts it. (Confirmation bias)
e.g.: Assuming that lottery outlets with a high frequency of winning tickets are more likely to produce winning tickets.
* The conformity effect increases feelings of anticipation and excitement.
* Due to the psychological tendency to follow the majority and the instinct to seek a sense of unity and shared experience, people feel the urge to join this trend. (Bandwagon Effect)
5. Loss aversion bias, habit formation, and dependence serve as motivations for continued purchases.
* Avoiding the regret of not buying or breaking a routine.
* The near miss this time triggers anticipation for the next time.
* A feeling of closeness because the winning numbers were related to something familiar.
6. Viewing it not as personal entertainment or a dream, but as a seasonal tradition or a participatory social event.
* Viewing seasonal lotteries as a regular social event.
* Following the excitement generated by the media and street events.
* Sharing it as a topic of conversation.
In any case, raising taxes for public works or war is likely to face resistance, but by using the lottery format, it is perceived as a “fleeting hope of striking it rich,” and people voluntarily contribute funds while expecting personal rewards. This means that human emotions play a crucial role in facilitating consensus building within social systems, and the lottery can be seen as a form of mechanism for achieving social fundraising and circulating funds within society, or for exploiting individual wealth, in a way that differs from the logic and coercive power inherent in the tax system.
On the other hand, while happiness and well-being may be vague and elusive emotions that are difficult to define, people inherently crave and pursue a happy and fulfilling life. To achieve this, it seems that an increase in per capita income is considered one of the essential factors, as evidenced by the enthusiasm for lotteries that offer the dream of striking it rich.
Incidentally, the principle of three-sided equivalence states that gross domestic product (GDP) is the same regardless of whether it is viewed from the perspective of production, distribution, or expenditure. Following this principle, it can be inferred that increasing real income per capita requires increasing real output per capita.
For example, the Industrial Revolution in Britain, which began in the mid-18th century and was driven by economic growth brought about by increased productivity, serves as an example of this, representing a turning point where various technological innovations dramatically transformed the social structure.
The British East India Company, which expanded into India, gained enormous profits from trading in Indian cotton cloth (calico), which was light, soft to the touch, warm, and easy to dye. The desire to produce this cotton fabric cheaply and in large quantities in Britain spurred technological innovations, beginning with John Kay’s flying shuttle, leading to the Industrial Revolution and enabling the mass production of inexpensive machine-made cotton textiles. After 1820, India transformed from a cotton textile exporting country to an importer and supplier of raw materials, and its traditional cotton textile industry, a handicraft industry, was devastated. Furthermore, Britain established a triangular trade route: cotton textiles from Britain to India, opium and cotton from India to China, and tea leaves from China to Britain. This period is also mentioned in my previous blog posts (on topics such as tea and curry spices), so please take a look at those as well.
However, simply increasing income is not sufficient to foster a fulfilling life and a sense of well-being. For example, in light of the frequent natural and man-made disasters in recent years, the importance of family and community ties has gained attention as a crucial value and daily concern for people, and it seems to be increasingly intertwined with policy and economic aspects.
One reason for this seems to be that recent economic uncertainties have shaken the image of the typical family unit, such as the one depicted in Laura Ingalls Wilder’s (1867-1957) “Little House on the Prairie,” a novel reflecting on her life during the American westward expansion – a family that, while not wealthy, was characterized by strong family ties and a warm, happy home.
There appears to be a close relationship between the breakdown of traditional family structures and the recent phenomena of economic, social, and mental impoverishment. Furthermore, just as Indian handicrafts suffered a devastating blow during the Industrial Revolution, in the modern era of AI-controlled robotization, it is no longer possible to expect increased income through labor-intensive work as in the past.
In any case, poverty, aging populations, unemployment, work-life balance, and inequality all significantly impact happiness. Therefore, providing support through policy and economic measures to help people find happiness in things other than income may be becoming recognized as a meaningful endeavor. This is likely because activities such as living, spending, working, raising children, healing, playing, learning, and socializing are all elements that induce subjective well-being.
According to Aristotle (384 BC – 322 BC), the ultimate goal of human action is the pursuit of eudaimonia, which encompasses happiness, well-being, and a flourishing life. Living well (euzeen) and acting well (prattein) are concepts distinct from happiness at a single point in time; rather, they represent the complete realization of the activity of the rational soul throughout one’s entire life. In other words, true happiness is not merely the pursuit of pleasure or wealth, but the result of virtuous activity. It is achieved by maximizing one’s innate rationality, fully utilizing one’s abilities, pursuing one’s potential to the fullest, and living a fulfilling, rational, and virtuous life. (See Nicomachean Ethics)
Aristotle emphasizes two types of virtue (aretē) as means to achieve eudaimonia: intellectual virtues and moral virtues, which are character traits acquired through the ability to act based on reason and through habituation. Virtue lies in the mean (mesotēs), a moderate state between two extremes, and using reason for ethical action and maintaining an appropriate balance without excess or deficiency is essential.
It is said that feelings of happiness derived from temporary pleasures, such as a sudden increase in income, quickly return to their original levels, while joy and happiness derived from activities not directly related to income, such as spending time with family or pursuing hobbies, are more sustainable.
It is also said that practicing ethical virtues not only leads to a valuable life but also has biological effects; experiencing eudaimonic happiness is said to lead to lower expression levels of inflammation-related genes and higher expression levels of antiviral and antibody-related genes.
As a further point to what was mentioned earlier regarding the British Industrial Revolution, Adam Smith (1723-1790), who examined free economic activity amidst the development of mercantilism and industrialism where the state restricted freedom and engaged in protectionism and intervention, argued that if the morality of traders is not sound, free economic activity can actually lead to harmful consequences in the market. Furthermore, he stated that it is inevitable that free competition in a market economy will create both winners and losers, high-income and low-income earners, and people of high and low social status.
In short, the process of economic growth can create both fortunate and unfortunate people, or happy and unhappy people. This is likely because, as Smith argued, individuals feel “sympathy” and act as observers from a third-party perspective, striving to ensure that their emotions and actions are praised by this observer, or at the very least, not condemned.
Since humans inherently suppress envy and sympathize more with joy than sorrow, Smith, who praised the value of competition in a market economy in “The Wealth of Nations,” might seem likely to celebrate the joyful winners. However, in “The Theory of Moral Sentiments,” he argues that winners are not necessarily happy.
This is because, according to Smith, human happiness arises when the mind is at peace (tranquility). He believed that the motives of those seeking wealth, high status, or the sympathy and admiration of others are based on ambition and vanity. Therefore, ambitious individuals striving to win in competition cannot maintain peace of mind and are consequently not happy.
In addition, Smith argued that there are two paths to achieving the goals of ambition and competition: the path of virtue and the path of wealth. He suggested that wise people tend to choose the less visible path of virtue, while weaker individuals tend to choose the more visible path of wealth.
Classical economics, represented by thinkers like Smith, considered labor, capital, and land as essential factors of production. However, due to the potential limitations on economic growth imposed by constraints on land, population, and natural resources, the prevailing view tended to favor a steady-state economy with zero growth.
However, after World War II, the economic boom driven by reconstruction led to capital growth, labor force growth, and technological advancements, ushering in a period of economic growth. This period saw the rise of neoclassical economics, which emphasized supply, and Keynesian economics, which emphasized demand and had a revolutionary impact during the economic downturns in countries like Britain after World War I. During this period of rapid economic growth, increased disposable income and the resulting economic prosperity brought about a sense of well-being, leading to a tendency to seek happiness in things other than work.
While everyone enjoyed this economic prosperity, the “Limits to Growth” report published by the Club of Rome in 1972 raised concerns about the sustainability of economic growth due to issues such as the depletion of natural resources and population growth. Then, in 1973, the price of oil suddenly quadrupled due to the Middle East War, and economic growth in developed countries slowed down.
Since then, various depopulation and sustainability programs have been implemented by the rulers, but the idea that population increases geometrically while resources (food) increase only arithmetically, leading to overpopulation and food shortages without population control measures, was previously proposed by the classical economist Thomas Malthus (1766-1834), so the Club of Rome may have adapted this idea.
The rulers are now strengthening surveillance and control under a strict management system that incorporates the latest AI technologies such as social credit score and digital IDs, and it seems that the commoners are being led to even greater anxiety and resulting unhappiness.
In this context, the lotteries offered by the ruling class—presented as gifts of profit sharing based on mutual aid, sharing, and fraternity, and supposedly intended to lead the unfortunate commoners to happiness—appear to conceal malicious exploitative tactics.
In fact, the lottery is a wealth redistribution system starting from the emotion of gambling, and since the profits are spent on projects such as maintaining social infrastructure, it is described as a “voluntary tax.” There is an analogy of “using someone else’s resources to achieve one’s goals,” and it cannot be said with certainty that investment in the lottery is not being used as a free ride to strengthen a management system that ultimately tightens the noose around one’s own neck.
Furthermore, in countries that issue government bonds denominated in their own currency, financial collapse is impossible because they can issue the currency needed for repayment. Therefore, even without relying on fundraising through lotteries, social public investment is theoretically possible, and it should be possible to stimulate economic growth through investment in public works.
In any case, while lotteries are considered not just a test of luck but also a means of generating social benefits, viewing them as a “means to fulfill dreams” can lead to misperceptions due to an overly optimistic view of probability, falling into the trap of loss aversion, and even justifying irrational behavior such as investing in something with a negative expected value, knowing it’s a waste of money.
If there are limits to the time and money spent on lotteries, perhaps investing that time and money in self-improvement—skill development, new experiences, and personal growth—could lead to greater returns. Furthermore, instead of relying on luck, pursuing realistic goals through one’s own efforts might provide a stepping stone to true happiness and a fulfilling life.
However, the dreams and excitement that come with buying a lottery ticket are hard to give up, and therefore, it might be essential to understand the irrationality inherent in lotteries while still engaging in this form of investment in the future.
Sincerely grateful for your financial support.
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