John Law (economist)

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John Law (baptised 21 April 1671 – died 21 March 1729) was a Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself and that national wealth depended on trade. He was appointed Controller General of Finances of France under King Louis XV.

In 1716 Law established the Banque Générale in France, a private bank, but three-quarters of the capital consisted of government bills and government-accepted notes, effectively making it the first central bank of the nation. He was responsible for the Mississippi Bubble and a chaotic economic collapse in France.

Law was a gambler and a brilliant mental calculator. He was known to win card games by mentally calculating the odds. He originated economic ideas such as "The Scarcity Theory of Value" and the "Real bills doctrine".

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Biography

Law was born into a family of bankers and goldsmiths from Fife; his father had purchased a landed estate at Cramond on the Firth of Forth and was known as Law of Lauriston. Law joined the family business at age fourteen and studied the banking business until his father died in 1688. Law subsequently neglected the firm in favour of more extravagant pursuits and travelled to London, where he lost large sums of money in gambling.[citation needed]

On 9 April 1694, John Law fought a duel with Edward Wilson. Wilson had challenged Law over the affections of Elizabeth Villiers. After Law killed Wilson, he was tried and found guilty of murder and sentenced to death. His sentence was commuted to a fine, upon the ground that the offence only amounted to manslaughter. Wilson's brother appealed and had Law imprisoned, but he managed to escape to Amsterdam.[1]

Law urged the establishment of a national bank to create and increase instruments of credit and the issue of banknotes backed by land, gold, or silver. The first manifestation of Law's system came when he had returned to Scotland and contributed to the debates leading to the Treaty of Union 1707. He published a text entitled Money and Trade Consider'd with a Proposal for Supplying the Nation with Money (1705).[2] Law's propositions of creating a national bank in Scotland were ultimately rejected, and he left to pursue his ambitions abroad.[3]

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