John Law

Who was John Law?

John Law 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 Company bubble and a chaotic economic collapse in France, which has been compared to the early-17th century tulip mania in Holland. The Mississippi Bubble was contemporaneous with the South Sea Company bubble of England.

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". Law’s views held that money creation will stimulate the economy, that paper money is preferable to metallic money which should be banned, and that shares are a superior form of money since they pay dividends.