John Law (economist)

John Law
John Law, by Casimir Balthazar
John Law, by Casimir Balthazar
Born(1671-04-21)21 April 1671
Edinburgh, Kingdom of Scotland
Died21 March 1729(1729-03-21) (aged 57)
Venice, Republic of Venice
OccupationEconomist, banker, financier, author, controller-general of finances
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John Law (pronounced [lɑs] in French in the traditional approximation of Laws, the colloquial Scottish form of the name;[1][2] 21 April 1671 – 21 March 1729) was a Scottish-French[3] economist who distinguished money, a means of exchange, from national wealth dependent on trade. He served as Controller General of Finances under the Duke of Orleans, who was regent for the juvenile Louis XV of France. In 1716, Law set up a private Banque Générale in France. A year later it was nationalised at his request and renamed as Banque Royale. The private bank had been funded mainly by John Law and Louis XV; three-quarters of its capital consisted of government bills and government-accepted notes, effectively making it the nation's first central bank. Backed only partially by silver, it was a fractional reserve bank. Law also set up and directed the Mississippi Company, funded by the Banque Royale. Its chaotic collapse has been compared to the 17th-century tulip mania parable in Holland.[4] The Mississippi bubble coincided with the South Sea bubble in England, which allegedly took ideas from it. Law was a gambler who would win card games by mentally calculating odds. He propounded ideas such as the scarcity theory of value[5] and the real bills doctrine.[6] He held that money creation stimulated an economy, paper money was preferable to metal, and dividend-paying shares a superior form of money.[7] The term "millionaire" was coined for beneficiaries of Law's scheme.[8][9]

  1. ^ Espinasse, Francis (1892). "Law, John (1671-1729)" . In Lee, Sidney (ed.). Dictionary of National Biography. Vol. 32. London: Smith, Elder & Co. pp. 230–234.
  2. ^ Estudes Romanes Dediees a Gaston Paris (in French). Slatkine. 1976. pp. 487 to 506, especially p. 501.
  3. ^ Collier's Encyclopedia (Book 14): "Law, John", p. 384. P. F. Collier Inc., 1978.
  4. ^ Cite error: The named reference nyfed was invoked but never defined (see the help page).
  5. ^ Geman, Helyette (29 December 2014). Agricultural Finance: From Crops to Land, Water and Infrastructure. John Wiley & Sons. ISBN 9781118827369.
  6. ^ Humphrey, Thomas M. (1982). "The Real Bills Doctrine" (PDF). Federal Reserve Bank of Richmond Economic Review: 5. Retrieved 15 January 2019.
  7. ^ "Federal Reserve Bank of Chicago, The Life and Times of Nicolas Dutot, November 2009" (PDF).
  8. ^ Murphy, Antoine (1997). John Law: Economic Theorist and Policy-maker. Clarendon Press. p. 3. ISBN 9780198286493.
  9. ^ Henriques, Diana (23 July 2000). "A Big Idea About Money". New York Times. Retrieved 30 January 2019.