Data and Blame: The Crisis of 1720 in 18th-Century Economic Thought

Are financial crises natural and inevitable, or are they somebody’s fault? Since 2008, one vibrant body of scholarship has begun to historicize and reinterpret past financial crises, while another has focused on discovering and rehabilitating an alternative canon of non- and pre-Smithian economic thought. So far there is little recognition that these two literatures might be connected. This paper addresses that gap by examining how two generations of eighteenth century writers and thinkers tried to understand the world's first international financial crisis: the crashes in Paris and London during the summer and winter of 1720. Specifically, it focuses on the theme of “despotic finance” that emerged in their attempts to make sense of what happened and to determine whose fault it was. Political economy writing in the 1730s and 1740s was dominated by men who had been personally involved in the crisis, especially in John Law’s System: Richard Cantillon, Nicolas Dutot, Jean-François Melon, Joseph Pâris Duverney, and Claude Pâris le Montagne. They were preoccupied both with the intellectual task of understanding the crisis and the political imperatives of guilt and exoneration. Since the crisis was an emergent event that took place in several financial markets of ferocious technical complexity, these arguments revolved around who knew, or should have known, what facts, and when, and what responsibilities they had to make those facts public. They conducted this argument in private manuscripts and public pamphlets, anonymous denunciations and policy briefs, continually moving between private personal disputes and claims to public interest and scientific knowledge. Recovering this discussion about the problem of financial impunity reveals the dark side of the familiar eighteenth century discourse on le doux commerce: that financial crises were not natural features of a self-authorized economic, but rather were political or ethical crimes that could and should be eliminated.