Title: “Millionaire: the Philanderer, Gambler, and Duelist who Invented Modern Finance”
Author: Janet Gleeson
Length: 304 pages, including bibliography and index.
Price: $24.00
Reading time: 6 hours
Reading rating: 6 (1=very hard, 10=very easy)
Overall rating: 3 (1=average, 4=outstanding)
Reviewed by Robert F. Mulligan

Special to the Asheville Citizen-Times

In "Millionaire," Janet Gleeson provides a compelling and entertaining portrait of John Law.  Law was a Scottish clergyman's headstrong son who was imprisoned for murder after a botched duel.  From early on, Law was mathematically astute, and delighted almost equally in gambling and in womanizing.

Once Law's friends sprung him from jail, he escaped to the continent, eventually settling in France.  His charming manners and exceptional physical appearance – he was extremely tall for those times - gained him acceptance in the most elite circles of continental society.

Law pioneered the statistical study of gambling games, enriching himself while impressing onlookers with his luck, skill, pleasant manners, and good looks.  All he did was calculate the odds of winning in his head, but because he was the first person to do this, it gave him a great advantage in the popular card games of those times, such as faro.

With royal and noble patronage, Law founded the Mississippi Company.  As its stock soared, servants who had bought a few shares became millionaires, and that, combined with Law's reputation as a gambler who never lost, created further demand for new shares.   As a business enterprise, the Mississippi Company was a disaster, at least in the short run, settling unsupportable colonies in what is now Louisiana.  It would not become obvious to the investors how worthless the whole enterprise was for several years.

Meanwhile, Law's Mississippi shares continued to soar, fueling additional demand.  It was one of the first speculative bubbles in history, but by no means the last.  Law's reputation and influence soared along with the share values.  The Mississippi Company was asked to take over the Royal Bank of France, and Law was named Comptroller General, a position equivalent to Secretary of the Treasury plus Chairman of the Federal Reserve System in the United States today.

Law issued paper money, which initially was well received and retained its value over time because Law did not issue too much.  The French economy, formerly shackled by a shortage of money, began to expand.  Trade flourished, but to every crisis, Law had only one response, new issues of paper money.

The master gambler proved to be a one-trick pony.  Once paper money ceased to be scarce and valuable, people began to hoard gold and silver, and panicked speculators began to dump their Mississippi shares.  La Rouchefoucald observed the paper money had reverted to its intrinsic value – zero.

"Millionaire" sheds welcome insight on the phenomena of hyperinflation, in which paper currency becomes worthless due to overissue, and speculative bubbles.  In spite of the French experience, hyperinflation would recur in America during the Revolution and the Civil War, in France during their Revolution, and in Germany after World War I.  The most recent speculative bubbles have been the Japanese stock market in the 1980s and the U.S. technology sector from the late nineties to last year, so this book has a timely message for modern investors.

The history Gleeson presents with this story is every bit as fascinating as the economics.  The colorful supporting cast includes such characters as Saint Simon, Voltaire, Montesquieu, La Rouchfoucald, and Daniel Defoe.

Robert F. Mulligan is assistant professor of economics, finance, and international business in the College of Business at Western Carolina University.  His research interests are fractal analysis of time series, economic forecasts, monetary policy, and international economics.  He is also a fierce fan of the Asheville Smoke.  For previously reviewed books, visit our web site at www.wcu.edu/cob/bookreviews.