ABSTRACT
In the early eighteenth century, the economist and gambler John Law founded the Banque Royale and the Mississippi Company in France. Law’s plan was a debt-to-equity operation. He wanted the Mississippi Company to absorb the entire public debt of the French state, with the public-debt shares becoming shares in the corporation. Law triggered what economists now consider one of the most severe financial collapses of the early modern age. His contemporary Daniel Defoe attacked his scheme as a “chimera.” Law’s plan, however, cannot be dismissed as mere fraud; it was more than that. The chapter shows he was inspired by San Giorgio. Prominent twentieth-century economists Earl J. Hamilton and Antoin Murphy were the first to propose this link, but they were unable to prove their hypothesis. Using my research in Hamilton’s archives, public archives in France and England, and archives in Genoa, the chapter reconstructs John Law’s previously undocumented stay in Genoa (1708–1711) and shows how he applied his practical knowledge of San Giorgio and Machiavelli’s text to fund and defend his scheme in France. The chapter takes a novel approach, synthesizing financial history and the history of literature and the media through an analysis of contemporary pamphlets.
