histofthought1

Mercantilism andfreedom in Englandfrom the Civil War to 1750 329activist, John Law of Lauriston (1671-1729). Son of James Law, a wealthyScottish goldsmith and banker, John was born and grew up in Edinburgh,proceeding to squander his father's substantial inheritance on gambling andfast living. Convicted of killing a love rival in a duel in London in 1694, Lawbribed his way out of prison and escaped to the Continent. After a decade inEurope pondering monetary problems, Law returned in 1703 to Scotland,where he was not subject to arrest. There, Law concentrated on developing andpublishing his monetary theory cum scheme, which he presented to the ScottishParliament in 1705, publishing the memorandum the same year in his famousor infamous tract, Money and Trade Considered, with a Proposalfor Supplyingthe Nation with Money (Edinburgh, 1705). The Scottish Parliament consideredbut turned down his scheme; the following year, the advent of the union ofScotland with England forced Law to flee to the Continent once more, since hewas still wanted by English law under the old murder charge.Karl Marx, in a sense, should have been proud of the way John Law'unified theory and practice' in his proposal. On the one hand, Law was thetheorist, arguing for a central land bank to issue inconvertible paper money,or rather, paper money 'backed' mystically by the land of the nation. As acrucial part of his proposal, the grateful nation - in this case Scotland - wassupposed to appoint Law himself, the expert and theoretician, in charge ofputting this inflationist central bank scheme into effect.John Law, as his subtitle states, proposed to 'supply the nation' with asufficiency of money. The increased money was supposed to vivify trade,increase employment and production - the 'employment' motif providing anice proto-Keynesian touch. Law stressed, in opposition to the scholastichard-money tradition, that money is a mere government creation, that it hasno intrinsic value as a metal. Its only function is to be a medium of exchange,and not any store of value for the future.Even more than William Potter, John Law assured the nation that theincreased money supply and bank credit would not raise prices, especiallyunder Law's own wise aegis. On the contrary, Law anticipated Irving Fisherand the monetarists by assuring that his paper money inflation would lead to'stability of value', presumably stability of the price of labour, or the purchasingpower of money.Law also anticipated .Adam Smith in the latter part of the eighteenthcentury in his fallacious justification for fractional-reserve banking that itwould provide a costless 'highway in the air' - furnishing a money supplywithout spending resources on the mining of gold or silver. In the same way,of course, any expenditure of resource can be considered a 'waste' if wesupply our own assumptions that are not held by people on the free market.Thus, as Professor Walter Block has pointed out, if there were no crime, allexpenditure on locks, fences, guards, alarm systems, etc. could be denounced