Scot free?

Since the latest financial bubble popped so loudly, commentators have been recalling a gentleman named John Law. Law was an adventurous Scot who back in the very early 1700s came up with the "Mississippi Scheme," a speculative investment project which ended up just about bankrupting the French nation. The project had so many repercussions that the first 45 pages of Charles Mackay's classic Extraordinary Popular Delusions and the Madness of Crowds ( 1841) are devoted to it.

Was Law then an economic criminal in the class of Charles Ponzi, Alexandre Stavisky or Bernard Madoff? Mackay himself is ambivalent, on the one hand saying that "Historians are divided in opinion as to whether they should designate him a knave or a madman," and on the other asking, "How was [Law] to foretell that the French people ... would kill, in their frantic eagerness, the fine goose he had brought to lay them so many golden eggs?"

A recent book by Niall Ferguson, The Ascent of Money, terms John Law "the man who invented the stock market bubble." In Arthur Herman's How the Scots Invented the Modern World, Law is portrayed as "a dreamer who never let details get in the way of a good plan," a visionary who "convince[d] the French crown to set up the Bank Royale."

Where does the truth lie, I wonder. Not all financiers are swindlers. But even if high finance can be a good thing, we have had much too much of it.