IN the entire history of Scotland it is very difficult to think of anyone other than John Law who has had such a huge influence on another country, certainly in terms of finance

and economy.

David Livingstone in Zambia and Malawi, perhaps, or Lachlan Macquarie in Australia, or perhaps Sir Alexander Mackenzie or Sir John Macdonald in Canada – I will be looking at these latter two men in detail in the coming weeks – can claim to have had great influence on a nation. Only Law, however, devised and ran a national bank – that of France – then nearly destroyed that country’s finances, while becoming Europe’s richest private citizen, setting up one of the greatest monetary “bubbles” of all time, and all that after killing a man in a duel, escaping from death row and having to flee the UK. Oh, and he was without a doubt the greatest Scottish gambler of them all, for who else has ever wagered the entire wealth of a country on his own ill-fated scheme?

He also might, just might, have prevented the Act of Union of 1707, as we shall see.

Law is a truly fascinating character and if you want to find out more details about him than I have space to give then please consult James Buchan’s excellent biography John Law, A Scottish Adventurer of the Eighteen Century, which was published to great critical acclaim last summer.

Born on April 16, 1671, Law was the son of a very successful goldsmith, silversmith and banker, William, who had bought Lauriston Castle at Cramond on the west edge of Edinburgh, which is why John became known as Law of Lauriston. At various times in his extraordinary life he would be John Lawe, Laws, Las, Lass, Lavv, Laur, Lau, Laus, Lauu and Labuu, but we’ll stick to plain Law.

Educated at the High School of Edinburgh, his father died when he was 13, having already apprenticed John to the family firm. He had a difficult relationship with his mother, a relative of the Duke of Argyll, as shown by the fact that he sued her for maintenance when he was 16. She had ensured, however, that Law had studied the subjects that would preoccupy the rest of his life – coinage, commerce and money in general. In the 1688, Law came into his inheritance and with the “Glorious Revolution” having made London the centre of the UK, he left the family business behind and travelled to the metropolis. There he soon became both a dandy and a gambler, though he continued to study such issues as commercial trading. With a natural head for figures, Law took to gambling and was successful at first though he later squandered considerable sums.

On April 9, 1694, Law killed Edward “Beau” Wilson, another notorious dandy, in a duel that took place in Bloomsbury Square in the heart of London. Apparently Wilson and Law were both in love with the same woman, Elizabeth Villiers, later the Countess of Orkney, the society beauty who had been the mistress of King William III and II. It is possible that Villiers, who had just been rejected by the King, set up the duel herself as a result of potential blackmail by Law, or she may have hoped that her debts to him would be cancelled by his death. Whatever the reason, Wilson challenged Law to the duel which ended with one single sword thrust by Law, who, like all Scottish gentlemen of the era, had been instructed in the art of swordplay.

Law was arrested and tried. He was found guilty of murder and sentenced to death, though the sentence was commuted to a heavy fine when the court changed its mind and after some pleading and finagling by Law.

The judge found him guilty only of manslaughter, but the brother of Edward Wilson brought the case back to court and once again it looked as though Law would be either in prison for a long time or be executed. With his common-law wife he fled to the Continent and there he lived the life of a rake while simultaneously developing his own theories about money.

His ideas were truly revolutionary. At a meeting with some of his fellows, someone mentioned the philosopher’s stone. Law astonished everyone present with his declaration – “I have found it.”

Asked to explain he said: “I can tell you my secret – it is to make gold out of paper.”

Law’s theory of the evolution of money was explained by him in this way: “He who had more goods than he had use for, would choose to barter them for silver, tho’ he had no use for it; because, silver was certain in its quality: It was easy of delivery: it could be kept without loss or expense, and with it he could purchase other goods as he had occasion, in whole or part, at home or abroad, silver being divisible without loss, and of the same value in different places.”

IN the period between the collapse of the Darien Expedition and the start of the negotiations for the Act of Union, Law came back to Scotland and in 1705 published his manifesto for a Scottish economy.

Law’s genius was to see that money of itself had no intrinsic value and a nation’s economy could be founded on paper money as long as it was tied to land values rather than gold or silver. The book compares the prosperity of other countries with that Scotland and called for what would effectively be the national bank of the Scottish land.

The eminent lawyer and historian Gavin John Adams, author of Letters to John Law, describes the book thus: “Money and Trade Considered, With a Proposal for Supplying the Nation with Money was so much more than a mere proposal for a note-issuing bank. It was a staggeringly original work of genius which not only included proposals for new systems of banking, and the issuing of paper money as a means to stimulate the economy, but also revealed, for the first time, several of the most significant economic concepts ever devised; concepts which would later be espoused by economists Adam Smith and John Maynard Keynes without acknowledgement.

“It was meant for the consideration of the Scottish Parliament, but the ideas it contained fundamentally altered economics, politics, finance, and, consequently, the modern world. John Law’s Money and Trade Considered is the most influential but least acknowledged work in the history of economics.”

James Buchan describes it thus: “Law asked what money is and then asks how to create it for the exigencies of the Kingdom of Scotland in 1705. He proposes an issue of paper money, secured not on deposits of silver (as in the Bank of Scotland) or the promises to pay of the King (as at the Bank of England) but the direct and indirect source of all wealth at the time, which was land.”

With his knowledge of England and the Continent, Law felt Scotland had a lot of advantages, especially in its people, but as he wrote: “Men and women, ‘arts-men’ [craftsmen], lands, buildings and vessels lay idle for want of money to set them in motion or use.”

The Scottish Parliament considered Law’s plan but thought it too much of a risk. The Parcel of Rogues wanted their “siller” in real coin and the English Parliament was about to give it to them. How different all our lives could have been had they tried Law’s new system – it might not have worked, but then again it might have, and saved Scotland from the Union. We’ll never know.

Thoroughly miffed, Law went back to the Continent in 1706 and then began his money-making projects. These included trying to set up private banks in several different countries and making a small fortune from insuring people who ran lotteries – common in those days – against a lucky winner. He was under surveillance almost all the time, suspected by the new British Government of being an agitator for the repeal of the Act of Union, and it is known that he did indeed provide money and shelter for Jacobites fleeing from Britain. One of the spies who tracked him was the Earl of Stair, son of the man who gave the orders for the Massacre of Glencoe. Law prospered, however, and when King Louis XIV of France died in 1715, the Duc D’Orleans became the regent for the young Louis XV and he granted an audience to Law whose reputation with money and commerce had gone before him. The Duc needed help – the French state was effectively bankrupt due to the Sun King’s phenomenal expenditure on wars and palaces.

Law persuaded the Duc to bring in paper money, and then he established the Banque Generale as a private bank. By April 1717, Law was the only issuer of banknotes which were now the only currency in which taxes could be paid.

With the success of his Banque, Law was able to convince the Duc to give him the trade and tax-raising monopoly in France’s possessions in the US which were mostly along the Mississippi River. Very soon afterwards Law was given total control of French trade around the world and was made controller general of the nation’s finances. As one commentator recently noted: “It seems less obvious to us today that the principal elements of Law’s monopolies exist in modern government finances, which use paper money to inflate assets providing their electorates with the illusion of wealth.”

Illusion it was – the Mississippi scheme was based on an ever-increasing share price but it eventually collapsed as all such speculative bubbles do. In 1720, the merged Banque and Mississippi company suffered a run, the entire French economic system collapsed and the impact was felt across Europe. Law was sacked from all his posts and had to flee the country.

He moved to Venice and returned to gambling for a living, but was left a poor man after making provision for his family. He had been given many honours. Buchan records that one time or another Law was marquis d’Effiat, Cherleval and Toucy, Comte de Tancraville and Valency, chamberlain and hereditary constable of Normandy, Baron de La Riviere, seigneur de Gerponville, Saint-Suplix, Roissy, Orcher and Guermantes proprietor of Arkansas, also de Ferry, Dujardin, Hamden, Annington, Wilmot, Hamilton, Gardiner, and in the Jacobite cipher 888.75.1804.

He was plain John Law when he died on March 21, 1729, in Venice, a month short of his 58th birthday. History has judged him as a dandy and rake, a gambler, cheat and murderer who made a country broke. Yet he is revered by many people today because of his monetary theories.

One of the greatest economists of the 20th century, the Harvard professor Joseph Schumpeter, wrote in A History of Economic Analysis in 1954: “John Law (1671-1729) I have always felt in a class by himself. He worked out the economics of his projects with a brilliance and, yes, profundity, which places him in the front ranks of monetary theorists of all time.”

Gavin John Adams sums up his legacy: “Every time you use a banknote; every time you use a modern coin; every time you use a credit card or debit card; every time you use internet banking; every time you use any modern crypto currency; every time you use a gift voucher; every time you use a poker chip; in fact, every time you enter into any form of transaction that does not rely on bartering, each such transaction has its ideological origins in John Law’s idea that money need have no intrinsic value.”