An Austrian Economist

On 9 April 1694, in Bloomsbury Square, a Scottish gambler named John Law killed Edward Wilson, a young dandy the town called Beau, with a single pass and thrust of his sword. The quarrel touched a lady, Elizabeth Villiers; the duel followed as a matter of course; and Law was condemned to death at the Old Bailey before Salathiel Lovell, a judge remembered chiefly for the relish with which he hanged people. The sentence dwindled to a fine on a finding of manslaughter, an appeal by Wilson’s brother returned him to a cell, and before the matter could be settled Law contrived an escape and got clean out of England, a fugitive not yet twenty-five, an Edinburgh goldsmith’s son with a gift for calculation that Europe’s gaming tables would spend twenty years subsidizing.

The exile made him, because he gambled through the capitals of the continent and studied their banks as he went, arriving at the conviction of his life: that the scarcity of money was a solvable defect, since whatever circulates will serve as money, and paper circulates far more obligingly than silver. Government after government declined the scheme, until September 1715, when Louis XIV died owing more money than his kingdom could count, and the Regent who governed for the five-year-old Louis XV, Philippe d’Orléans, proved to be a man of imagination, appetite, and empty vaults, the precise combination a monetary projector requires. In May 1716 Law opened the Banque Générale, a private bank of issue; at the close of 1718 it became the Banque Royale, its notes guaranteed by the King of France. In between came the Compagnie d’Occident, the Mississippi Company, holding the Louisiana trade monopoly, and through 1719 the Company swallowed its rivals until, restyled the Compagnie des Indes, it held the overseas commerce of France in one hand and reached for the mint and the tax farms with the other.