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1720: John Law and the Mississippi Bubble (B)
Bruner, Robert F.; Miller, Scott Case F-1813 / Published August 1, 2018 / 6 pages.
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Product Overview

The B case follows John Law after the crash of the Mississippi Bubble. From 1721 to 1723, John Law hovered near to France, hoping to receive a message from the regent to return and repair his system. Throughout his exile, Law maintained an amicable relationship with the regent and always hoped to return to France. Meanwhile, the French political pendulum continued to swing to the right, in favor of the financial system of the ancient regime. In short, the new regime deconstructed Law's system: institutions closed, monopolies redistributed, and government debts renegotiated or repudiated. The government sharply limited the granting of corporate charters and development of the banking industry.


Learning Objectives

Review the causes and consequences of the Mississippi Bubble and its crash. Illustrate an early example of a financial innovator and policy entrepreneur who seeks to carry into practice concepts for innovations in markets, institutions, and instruments. Survey the economic ideas of John Law, understand why they were revolutionary in 1720, and interpret their relevance today. Explore the political and economic challenges related to the modernization of a national financial system, and the relationship between the development of the financial system and overall economic development of a country, giving particular attention to the influence of mercantilism on strategies of national finance. Consider the general importance of institutions (i.e., norms, laws, and regulations) in the economic and financial development of a nation.

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  • Overview

    The B case follows John Law after the crash of the Mississippi Bubble. From 1721 to 1723, John Law hovered near to France, hoping to receive a message from the regent to return and repair his system. Throughout his exile, Law maintained an amicable relationship with the regent and always hoped to return to France. Meanwhile, the French political pendulum continued to swing to the right, in favor of the financial system of the ancient regime. In short, the new regime deconstructed Law's system: institutions closed, monopolies redistributed, and government debts renegotiated or repudiated. The government sharply limited the granting of corporate charters and development of the banking industry.

  • Learning Objectives

    Learning Objectives

    Review the causes and consequences of the Mississippi Bubble and its crash. Illustrate an early example of a financial innovator and policy entrepreneur who seeks to carry into practice concepts for innovations in markets, institutions, and instruments. Survey the economic ideas of John Law, understand why they were revolutionary in 1720, and interpret their relevance today. Explore the political and economic challenges related to the modernization of a national financial system, and the relationship between the development of the financial system and overall economic development of a country, giving particular attention to the influence of mercantilism on strategies of national finance. Consider the general importance of institutions (i.e., norms, laws, and regulations) in the economic and financial development of a nation.