Where did the tooth fairy come from?

Last night the infamous tooth fairy made it's first journey to our home and the cheap bastard only left a dollar.  A dollar for my daughter's perfect tooth, so much for perfection being priceless.  Where did the tooth fairy come from?  Well there seems to be very little concensus on this subject, but it is a bit interesting to read the history of various cultures ways of dealing with teeth through the ages.

This is the best explanation I came across for the modern day tooth fairy:

Teething rituals date back to ancient times. Most societies view teething as a rite of passage – the nursing baby becomes a chewing infant when teeth come in; the infant becomes a youngster when the baby teeth are lost and the permanent teeth arrive. As with any rite of passage, different societies have evolved their own rituals and superstitions.But this particular ritual may be only a century old.

There are lots of ancient folk methods of disposing of lost teeth, and lots of superstitions surrounding the teething process, both the initial arrival of baby teeth ("milk teeth"), and their exfoliation and replacement by the adult (permanent) teeth. But let's focus on the loss of baby teeth.

A child normally has twenty baby teeth and starts losing them at around age 5 or 6. Back when witches were believed to use pieces of your body, such as hair and fingernail clippings, to direct magic and curses at you, proper disposal of teeth was a serious business. The process differed by culture, from throwing the tooth up to the sun or over the roof, to feeding them to an animal (usually a mouse). The tooth could be buried, hidden, swallowed, or burned (sometimes after salting). In some cultures only the first exfoliated tooth was ritually disposed of.

If an animal eats a lost baby tooth, the new teeth coming in will supposedly resemble that animal's such as a dog's tooth or pig's tooth. Letting the tooth be eaten by mice or rats will ensure that the child grows strong, sharp teeth (such folk rituals were recorded as late as 1929). People carried around an animal's tooth as a good luck charm – shark's teeth are worn on strings to this day.

So we have long traditions about the importance of proper tooth disposal, and of course equally ancient traditions about fairies. But the two didn't get together for quite a while. There's a tradition from 18th century France of a "tooth mouse," likely based on a fairy tale, La Bonne Petite Souris, in which a fairy changes into a mouse (or perhaps the other way around) to help the good queen defeat the evil king. The mouse hides under a pillow to taunt the king, and punishes him by knocking out all his teeth. Perhaps this was the origin of the tooth fairy, but no one knows for sure.

The tooth fairy as we now know her didn't make an appearance until the early 1900s, as a generalized "good fairy" with a professional specialization.  The child loses a baby tooth, which is put under the pillow at night, and the tooth fairy exchanges it for a present, usually money but sometimes candy. Exchanges of this sort are common in many rites of passage (like an exchange of rings at a wedding, say).

The tooth fairy grew slowly in popularity over the next few decades. The Tooth Fairy, a three-act playlet for children by Esther Watkins Arnold, was published in 1927. Lee Rogow's story "The Tooth Fairy" appeared in 1949 and seems to be the first children's story written about the tooth fairy. She became widely popular from the 1950s onward, with a veritable eruption of children's books, cartoons, jokes, etc., including more focus on children's dental hygiene. Parents cheerfully bought into the idea and the tooth fairy became part of family life. The 1980s saw the commercialization and merchandising of the tooth fairy, with special pillows, dolls, banks, etc.

What does the tooth fairy do with all those teeth? There's no consensus. Terry Pratchett in Hogfather suggests they're just collected, neatly labeled and filed away in a museum-like castle. Pratchett also suggests that the tooth fairy's business involves intricate record-keeping and accounting, and says she "carries pliers – if she can't make change, she has to take an extra tooth on account." I think I'd just as soon not explain that part to kids.

The tooth fairy doesn't have the developed mythos of, say, Santa Claus. Santa has a residence, an occupation, helpers, reindeer, even an identifiable slogan ("ho ho ho"). The tooth fairy has none of that. Of course, not being encumbered by a mythos, the TF has no religious significance and no holiday affiliation, so can be accepted by everyone.

Tooth fairy economics have been closely studied. Rosemary Wells, acknowledged as the world's leading tooth fairy authority, tracked the exchange rate for teeth from 1900 to 1980 against the consumer price index, and found that the tooth fairy kept up with inflation. Another survey in the mid 1990s claimed that the going rate had increased to nearly two bucks from a dime 25 years previously. If so I must have come from a privileged background – back in the 1950s I could swear I got a quarter. 

Writing in American Folklore (edited by Jan Brunvand, 1996), Ms. Wells noted the significance of rites of passage for children. Most children start losing their baby teeth around age 5 or 6, coincidentally the time when they're starting school. Shedding teeth and can be annoying and frightening but is also a sign of growing up. Ms. Wells suggests that giving a child a treat for the lost tooth is a way of softening the scariness surrounding the process.

Belief in the Tooth Fairy is generally short-lived. Though the last baby teeth usually aren't lost till age 10 or 11, most children no longer believe by 7 or 8. Parents frequently play out the game anyway and their kids fully expect them to – there's money at stake.

Incidentally, Ms. Wells maintained a tooth fairy museum in her home in Deerfield, Illinois, until her death a few years ago. Eyewitnesses tell me the museum had an incredible collection of tooth fairy memorabilia.  

And that's the tooth, the whole tooth, and nothing but the tooth. - DEX; The Straight Dope

Where did the tooth fairy come from?