Law, John, 1671–1729, Scottish financier in France, b. Edinburgh. After killing a man in a duel (1694) he fled to Amsterdam, where he studied banking. Returning to Scotland (1700), he proposed to Parliament plans for trade and revenue reforms and published Money and Trade Considered (1705). His ideas and a proposal for a national bank were rejected, and Law went to France. The finances of France were in critical condition at the death of King Louis XIV, and Law succeeded in winning the support of the regent, Philippe II, duc d'Orléans Philippe I, duc d'Orléans, 1640–1701, a brother of King Louis XIV. A notorious libertine, Philippe was excluded from participation in state affairs, though he fought in the Dutch War and won the victory of Cassel (1677).
..... Click the link for more information. , for a scheme that promised to reduce the public debt and stimulate French trade and industry. Law believed that credit and paper money, by encouraging investment, would regenerate the French economy. In 1716 the regent chartered Law's private Banque générale and authorized it to issue paper currency. In 1717, Law acquired the monopoly of commercial privileges in the French colony of Louisiana and organized the Compagnie d'Occident, or Mississippi Company, which was consolidated (1719) with the French East India Company and other organizations as the Compagnie des Indes.

The Banque générale was made the royal bank in 1718, and its issues of notes were guaranteed by the state. Finally (1720), Law, made controller general of finances, merged the huge stock company with the royal bank and took over most of the public debt and the administration of revenue. A rash of speculation swept France. Numerous small investors bought stock, which soared to heights far beyond what could be expected in returns from the exploitation of the colonies (see Mississippi Scheme Mississippi Scheme, plan formulated by John Law for the colonization and commercial exploitation of the Mississippi valley and other French colonial areas. In 1717 the French merchant Antoine Crozat transferred his monopoly of commercial privileges in Louisiana to
..... Click the link for more information. ) and from trade with Asia. The bubble burst suddenly. Well-informed speculators sold their stock at huge profits, setting off a frenzy of selling that ruined thousands of investors. The system collapsed (1720), and Law fled France in disgrace. He died in Venice, where he had supported himself by gambling.

The dizzy speculation caused by Law's system greatly helped to discredit the regency and the idea of a national bank. Although the immediate results of Law's schemes were disastrous, colonial enterprise received a lasting stimulus. His monetary theories have found defenders among later economists.

Bibliography

See biographies by H. M. Hyde (rev. ed. 1969) and J. Gleeson (2000).

Law, John

(baptized April 21, 1671, Edinburgh, Scot.—died March 21, 1729, Venice) Scottish monetary reformer. In 1705 he published the banking reform plan Money and Trade Considered, in which, unlike other mercantilists, he proposed a central bank as an agency for manufacturing money, as banknotes rather than as gold and silver. France agreed to try his plan in 1716, and he founded the Banque Générale, which was authorized to issue notes. He soon combined it with a company empowered to develop France's North American territories, particularly the lower Mississippi valley. His plan foundered; held responsible for the “Mississippi Bubble” speculative disaster, he fled to France and died in poverty in Venice.