''Money and Trade Considered: With a Proposal for Supplying the Nation with Money'' is an early economics text written by

John Law John Law may refer to: Arts and entertainment * John Law (artist) (born 1958), American artist * John Law (comics), comic-book character created by Will Eisner * John Law (film director), Hong Kong film director * John Law (musician) (born 1961) ...

Lauriston Lauriston ( ) is an area of central Edinburgh, Scotland, and home to a number of significant historic buildings. It lies south of Edinburgh Castle and the Grassmarket, and north of The Meadows public park. Lauriston is the former location ...

, published in 1705.Money and trade considered: with a proposal for supplying the nation with money. First published at Edinburgh 1705
/ref> In it, he attempts to compare the prosperity of other countries with that of

Scotland Scotland (, ) is a Countries of the United Kingdom, country that is part of the United Kingdom. Covering the northern third of the island of Great Britain, mainland Scotland has a Anglo-Scottish border, border with England to the southeast ...

, and advocates a "land bank" system of paper money backed by real estate as a commodity instead of gold or silver.

The Book

John Law examines what he finds to be problems with

monetary theory Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it ...

in Scotland. This topic had been growing in attractiveness for the previous 150 years, as Europe had suffered an increasing crisis known as the

price revolution The Price Revolution, sometimes known as the Spanish Price Revolution, was a series of economic events that occurred between the second half of the 15th century and the first half of the 17th century, and most specifically linked to the high rate o ...

, where the value of gold had been fluctuating wildly, and falling overall, in large part because of the influx of additional gold plundered from the

New World The term ''New World'' is often used to mean the majority of Earth's Western Hemisphere, specifically the Americas."America." ''The Oxford Companion to the English Language'' (). McArthur, Tom, ed., 1992. New York: Oxford University Press, p. ...

. Law describes the scarcity of money as being essential for its value, a lesson learned by that crisis of the previous two centuries. He describes the evolution of money this way: Because silver, the common money in Scotland at the time, is falling in value, he proposes land, whose value is more stable, as a replacement backing for currency. Regarding the Price Revolution, Law says:

The Spainiards bring as great Quantities into Europe as they can get wrought out of the Mines

Thus, he says, the value of metal currency has been diluted. Remarkable in his work is the assertion that money is not something invented by government authority, which was the popular view of government authorities at the time. But he cedes, as was probably legally required of him, that government (the King) ''owns'' all money, as he owns all roads and land. He also points out that money is not actually traded for its own value, but as a tool for obtaining goods themselves.

Impact

Gavin John Adams described the impact and legacy of ''Money and Trade Considered'' as follows:

''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 such as Adam Smith and
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
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.

The book failed to convince the Scottish government to implement a paper money system, but "contained the germ ... of the System" which Law subsequent progressed in

France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...

. Unfortunately, his implementation of this system was particularly poorly managed, suffering first extreme speculation and then rampant inflation, until failing some years later.

Friedrich Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Haye ...

saw "great perspicacity" in three aspects of Law's work: (1) the substantial qualities of a money, (2) commodity value, "anticipating many elements of the modern theory of subjective value", and (3) a historical account of money and its supply. In summary, Hayek suggested that "The individual components of Law's proposal were nothing new... But these ideas had never been presented with equal brilliance and persuasiveness."

References

External links

* {{librivox book , title=Money and Trade Considered, author=John Law Economics books Monetary economics 1705 books 1705 in economics