LAW, JOHN, the famous projector, was the eldest son of a goldsmith in Edinburgh, by Elizabeth Campbell, heiress of Laurieston near that city; and was born about the year 1681. He was bred to no business; but possessed great abilities, and a very fertile invention. He had the address, when but a very young man, to recommend himself to the king's ministers in Scotland to arrange the revenue accounts, which were in great disorder at the time of settling the equivalent before the union of the kingdoms. The attention of the Scottish parliament being also turned to the contrivance of some means for supplying the kingdom with money, and facilitating the circulation of specie, for want of which the industry of Scotland languished; he proposed to them, for these purposes, the establishment of a bank of a particular kind, which he seems to have imagined might issue paper to the amount of the whole value of all the lands in the country: but this scheme the parliament by no means thought it expedient to adopt.
His father dying about the year 1704, Law succeeded to the small estate of Laurieston; but the rents being insufficient for his expences, he had recourse to gaming. He was tall and graceful in his person, and much addicted to gallantry and finery; and giving a sort of ton at Edinburgh, he went commonly by the name of Beau Law. He was forced to fly his country, however, in the midst of his career, in consequence of having fought a duel and killed his antagonist; and in some of the French literary gazettes it is said that he ran off with a married lady. In his flight from justice he visited Italy; and was banished from Venice and Genoa, because he contrived to drain the youth of these cities of their money, by his superiority in calculation, that is, by being a cheat and a sharper. He wandered over all Italy, living on the event of the most singular bets and wagers, which seemed to be advantageous to those who were curious after novelty; but which were always of the most certain success with regard to him. He arrived at Turin, and proposed his system to the duke of Savoy, who saw at once, that, by deceiving his subjects, he would in a short time have the whole money of the kingdom in his possession: but that sagacious prince asking him how his subjects were to pay their taxes when all their money should be gone, Law was disconcerted, not expecting such a question.
Having been banished from Italy, and thus repulsed at Turin, Law proceeded to Paris, where he was already known as a projector. In the lifetime of Louis XIV. he had transmitted his schemes to Desmarest and to Chamillard, who had rejected them as dangerous innovations. He now proposed them to the Duc d'Orleans, who desired Noailles to examine them, to be as favourable in his report as possible, and
to remark such of them as were practicable. Noailles called in the assistance of several merchants and bankers, who were averse to the system. Law then proposed the establishment of a bank, composed of a company, with a stock of six millions. Such an institution promised to be very advantageous to commerce. An act of the 2d March 1716 established this bank, by authority, in favour of Law and his associates; two hundred thousand shares were instituted of one thousand livres each; and Law deposited in it to the value of two or three thousand crowns which he had accumulated in Italy, by gaming or otherwise. This establishment very much displeased the bankers, because at the beginning business was transacted here at a very small premium, which the old financiers had charged very highly. Many people had at first little confidence in this bank; but when it was found that the payments were made with quickness and punctuality, they began to prefer its notes to ready money. In consequence of this, shares rose to more than 20 times their original value; and in 1719 their valuation was more than 80 times the amount of all the current specie in the kingdom. But the following year, this great fabric of false credit fell to the ground, and almost overthrew the French government, ruining some thousands of families; and it is remarkable, that the same desperate game was playing by the South sea directors in England, in the same fatal year, 1720. Law being exiled as soon as the credit of his projects began to fail, retired to Venice, where he died in 1729.
The principles upon which Law's original scheme was founded, are explained by himself in A Discourse concerning Money and Trade, which he published in Scotland where (as we have seen) he first proposed it. "The splendid but visionary ideas which are set forth in that and some other works upon the same principles (Dr Adam Smith observes), still continue to make an impression upon many people, and have perhaps in part contributed to that excess of banking which has of late been complained of both in Scotland and in other places."