Before dealing with the complex interrelationship between [John] Law and Cantillon it is necessary to explain the monetary environment in which they operated, an environment popularized in the public eye through images of bubbles, speculative mania, and irrational behaviour during what amounted to the ﬁrst major stock market boom in Europe in 1718–20. This boom involved what were popularly known as the Mississippi System and the South Sea Bubble. The popular image of these stock market booms needs to be counterbalanced by the alternative view that interprets the Mississippi System and the South Sea Company as serious attempts at ﬁnancial innovation, as efforts to free policy from the suffocating constraints imposed on it by the management of the war-induced national debt. These ﬁnancial innovations failed, not because the idea behind them was fundamentally ﬂawed, but because their projectors, along with their political backers, were over adventurous and too many ‘invisible hands’ found their way into the public purse (p. 65).
Friday, 26 December 2014
An alternative view of the Mississippi System and the South Sea Bubble
From Richard Cantillon: Entrepreneur and Economist by Antoin E. Murphy