John Law: Economic Theorist and Policy-Maker

John Law: Economic Theorist and Policy-Maker

John Law: Economic Theorist and Policy-Maker

John Law: Economic Theorist and Policy-Maker


John Law (1671-1729) is most widely known outside economics as a rake, duellist and gambler. This intellectual biography of the Scottish-born economic theorist and policy-maker shows him to have been a significant economic theorist when economic conceptualization was very much at an embryonic stage. It also explains his ultimate failure.


. . . posterity will do you justice, and make a vast difference between your wretched imitators, and the great original they endeavoured to copy after. When some future historian, with a genius equal to the work he undertakes, shall in some distant age arise in France, and shall give an account of all the prodigies that happened in this wonderful Aera, which from henceforth will be the most remarkable of any in the annals of his country.

(A Letter to Mr Law, on his Arrival in Great Britain, 1721)

A man of sense therefore values himself more upon being of an opinion which shall gain the ascendant in time with respect to a new thing founded on truth and reason, for by this means he will be of the public opinion at last, because all the world comes into his sentiments.

(The Present State of the French Revenues and Trade, 1720)

This book could be started by stating that the subject in question, John Law, was born in 1671. To commence a book on John Law in this way would be to do him a disservice. While born in Edinburgh in 1671, his spiritual age of birth was really three hundred years later in the year 1971, a year in which the final link between the Western world's monetary system and metallic money was finally broken when the United States cut the last vestiges of the gold standard system by refusing to guarantee any longer the fixed price of $35 for an ounce of gold. Post-1971 the international financial system has been unshackled from gold. Ironically, it was only on the tercentenary of Law's birth that the world moved to the system which he envisaged at the start of the eighteenth century and which he actually succeeded in implementing for a short period in France between 1719 and 1720. In producing a paper/credit monetary system which replaced, albeit temporarily, the metallic money system of eighteenth-century France, John Law behaved very much like a man of the twentieth century who knew that the banking system did not need to be anchored by gold or silver. There was more to him than just banking prescience. His theoretical economic writings, as will be shown, captured many key conceptual points which are very much part of modern monetary theorizing.

Despite his modernity, Law has been a much maligned figure in history in the intervening three centuries. Law, as well as writing brilliantly on economic theory and presciently on the future of banking, produced a system which collapsed with resounding echoes for the rest of the eighteenth century. The collapse in question . . .

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