LAW, JOHN (1671-1729), Scottish economist, the originator of the "Mississippi scheme," was born at Edinburgh in April 1671. He studied mathematics, commerce and political economy in London, and banking operations at Amsterdam, whither he fled (1694) after killing Edward Wilson in a duel. On his return to Scotland in 1705, he submitted a scheme for a national bank to the Scottish parliament, but owing to Paterson's influence it was re jected, and similar proposals made to other European Govern ments met with a like fate. On May 20, 1716, however, Law ob tained letters patent to establish a Banque generale in France. The capital of six million livres was divided into 1,200 shares of 5,000 livres each, payable in four instalments, one-fourth in cash, three fourths in billets d'etat. The bank was empowered to issue notes payable at sight in the weight and value of the money mentioned at the day of issue, and on April 1 o, 1717, it was decreed that Law's notes should be received in payment of taxes. So successful was the undertaking that not only did the rate of interest fall to 41%, but the note issue rose to 6o million livres. Law, having gained the full confidence of the Regent, now proceeded with his Mississippi scheme.
In Aug. 1717, he founded the Compagnie de la Louisiane ou d'Occident, which absorbed both the company founded by Antoine Crozat in 1712, and the Compagnie du Canada. Extensive powers over the area drained by the Mississippi, the Ohio and the Missouri were granted, and in 1718 they were extended by the company's purchase of the tobacco monopoly. The success of this scheme was sufficient to arouse hostility in Paris, resulting in the formation of a rival company, and a consequent drop in the shares of Law's undertaking. He proceeded with his plans, however, and in Dec. 1718, when the Banque generale was converted into the Banque royale, whose notes were guaranteed by the king, he became direc tor of the new institution. A further step was made towards con solidation in the following year, when the Compagnie d'Occident absorbed the Compagnies des hides Orientates et de la Chine, tak ing the name of the Compagnie des Indes. Shortly after, the com
pany was granted the management of the mint and the coin issue for nine years, and the farming of the national revenues, on under taking the payment of the national debt. Speculation reached an unparalleled height, and when the climax came in 1720, with the amalgamation of the Compagnie des Indes and the Banque royale, reaction had already set in. The public becoming alarmed, drastic measures were taken to check the drain of coin, but the decree of May 21, 1720, by which the value of the bank notes was to be gradually reduced to one half, precipitated the panic, and a week later the bank suspended payment. Law was removed from his office, and the whole system was demolished by his enemies. In Dec. 1720 Law left France secretly, resumed his wandering life, and died at Venice on March 21, 1729.
Of Law's writings the most important is Money and Trade Con sidered (1720). Though subject to the errors of his time, he was undoubtedly a financial genius.
The fullest account of the Mississippi scheme is that of Thiers, Law et son systeme des finances (1826, American trans. 1859). See also Hey mann, Law and sein System (1853) ; Pierre Bonnassieux, Les Grandes Compagnies de commerce (1892) ; S. Alexi, John Law and sein System (1885) ; E. Levasseur, Recherches historiques sur le systeme de Law (1854) ; and Jobez, Une Preface au socialisme, ou le systeme de Law et la chasse aux capitalistes (1848). Full biographical details are given in Wood's Life of Law (1824). All Law's later writings are to be found in Daire, Collection des principaux economistes, vol. i. (1843). Other works on Law are: A. W. Wiston-Glynn, John Law of Lauriston (1908) ; P. A. Cachut, The Financier Law, his Scheme and Times (1856) ; • A. Macf. Davis, An Historical Study of Law's System (Boston, 1887) ; A. Beljame, La Prononciation du nom de Jean Law le financier (1891) ; A. Martineau, Mem. sur quelques affaires de L'Empire mogol, 1756-61 (1913) ; G. Oudard, La tres curieuse Vie de Law (1927). See also article on Law by W. A. S. Hewins in Palgrave's Dictionary of Political Economy (1925).