At school in Edinburgh, John Law was proficient in arithmetic and algebra. He was therefore well placed to give practical application to his interest in probability theory, and he went to England to make his fortune. He spent much of the early 1690s ‘gaming and sharping’, while studying mathematics, commerce, and political economy in London.
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After killing an adversary in a duel, he fled to Amsterdam, where he studied banking operations. A decade later he returned to Scotland and wrote his best-known work, Money and Trade Considered, with a Proposal for Supplying the Nation with Money. He submitted his banking reform plan to the Scottish parliament, but it was rejected.
After several other rejections, Law received permission in 1716 to try his plan in France. The French government was heavily in debt as a result of the extensive wars of Louis XIV, who died in 1715; and Law’s program, which promised to reduce the public debt, held obvious appeal.
With Law, however, lowering the public debt was somewhat incidental. He shared with his mercantilist contemporaries a belief that money is a creative force in economic development and that an increase in its quantity would stimulate a larger national product and would increase national power. He differed from other mercantilists in looking upon a central bank as an agency for manufacturing money in the form of bank notes that would circulate in place of gold and silver, which were scarce.
In Paris, Law founded a bank with authority to issue notes. Later he combined with his bank the Louisiana Company, which had exclusive privileges to develop the vast French territories in the Mississippi Valley of North America. Law’s plan worked well for a few years but fell foul of speculative complications and political intrigue, neither of which were directly attributable to Law. As the author of the program, popularly known as the “Mississippi Bubble,” Law was responsible and was forced to flee France in 1720. He died in Venice a poor man.
