Friday, September 19, 2008

Econ History Friday: How Voltaire Pwnd Louis XV

"I can haz your lottery"

This is actually fairly well-known, but David G Schwartz's "Roll The Bones" provides all a pretty good 2 page write up about Voltaire money making scheme.

So, in order to encourage the purchase of Parisian municipal bonds, Louis XV's financial minister Le Pelletier-Desforts created a monthly lottery drawing for all owners of muni bonds to participate in.

But the lottery has a catch:
Bondholders could only buy them in proportion to the size of their bonds. Thus the holder of a 100,000-franc bond paid 100 francs to buy a ticket, while the holder of a 1,000 franc bond holder paid just one franc... both the 100 franc and the 1-franc tickets had an equal chance of winning
Voltaire (and associates) bought up all the 1-franc tickets: In October they, they won 1,004,000 out of the 1,040,000 franc awarded... out of a total prize money of 9,600,000 franc, Voltarie personally took home at least one million francs.

With that money, Voltaire was able to devote his life to the ideals of the enlightenment, human rights... and womanizing.

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