Great Economists Since Petty and Boisguilbert
Edited by Gilbert Faccarello and Heinz D. Kurz
Chapter 4: John Law (1671–1729)
John Law (1671–1729) is rare among economists in that he not only attempted to produce a template for addressing monetary and financial crises, but actually implemented this template for a brief time between 1716 and 1720 in France, during a period known as the Mississippi System. The Mississippi System produced the world’s first financial bubble which in turn served as a model for the British South Sea Bubble of 1720. By the end of 1720 both bubbles had collapsed and John Law, who had been appointed the equivalent of Prime Minister of France in January 1720, was hastily forced to flee to Brussels and later to Venice where he died in 1729. As such there are two main perspectives against which to examine Law, namely, (1) his role as a macroeconomic/monetary theorist and (2) his activities as a macroeconomic policy-maker. From the first perspective many economists, including Cantillon, Hume, Smith, Marx and Marshall severely criticized Law for his unrealistic and “visionary” theories. Contrastingly, however, Joseph Schumpeter rated Law as “one of the outstanding monetary theorists of all time”. From the second perspective it is germane to note that Nicolas Du Tot, a significant contemporary analyst of the Mississippi System, remarked that posterity would not believe that Law had managed to create a specie-less system in France for a short period. It would take another couple of centuries for the global economy to move off the gold standard, an environment that Law had attempted to remove in France between 1716...
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