What I Said — but from someone who knows what he’s talking about: Isaac Newton and Money Manias edition

Readers of this blog may have noticed that I recently published a book (ya’ think? –ed.).  Titled Newton and the Counterfeiter (AmazonPowellsBarnes and Noble,Indiebound), it tells a story from Isaac Newton’s second career as boss of the Royal Mint — how he chased down the notorious currency crook William Chaloner in a battle that ranged across London and took two years.

Through that story I get to look at lots of other stuff — the way the scientific revolution worked itself out at street level, connections between ideas of faith, science, and what with the benefit/arrogance of hindsight we call magic (alchemy), and how England for a variety of reasons undertook a financial revolution in parallel to and in part propelled by the same ideas and people who led the scientific one.

In that context I look at some of the stuff that Chaloner counterfeited — truly weird new bits of paper that still represented enormous value — and I trace the evolution of Newton’s thinking about whether or not money is just a thing — a chunk of gold or silver with a pretty design — or something more abstract, more elusive…a promise.  (See this post from last year for more on that subject.)*

And in telling all this I give my readers a glimpse of a true economic and financial wild-west, one in which there is not only a dearth of anything resembling regulation, but in which the meaning and import and dangers inherent in the newborn tricks of financial engineering eluded even the brightest of thinkers, up to and including the great Isaac Newton — who in fact lost one of his shirts, at least, in the infamous South Sea Bubble.

And there I conclude, gently, by implication, that the reason financial regulation with teeth is an essential part of a modern capitalist economy is that none of us, not even the one man in history best placed to see through the fraudulent math behind bubbles, are immune to the derangement of reason that money manias educe.  (I made the same point in this post , in which I discussed both some of Newton’s ideas about money (again) and his troubles in the summer of 1720.)

All this by way of preamble that while all the above is true and, I believe, a strong argument, I can’t suggest that your humble blogger could hold a candle to lighthouse beacon of economic chops in the person of the man who just said this in an interview with The Atlantic‘s Conor Clarke:

Self regulation never worked as far as macroeconomic events — whether we’re talking about post-Napoleonic War business cycles or the big south sea bubble back in Isaac Newton’s time, up to today’s time. The pendulum just swings back in the other direction.

The speaker there would be none other than Paul Samuelson, Nobel(ish) laureate, for years America’s leading Keynsian (or at least, popularizer of Keynes’ work) and author of the single most influential introductory economics textbook since the satraps of Ur first put stylus to clay.

Maybe if Tom Levenson says it, you can consider the source and ignore it.  But Samuelson?  Might as well try to bargain the ten commandments ten down to six.**

*Or, of course, just buy the damn book. 😉

**Old, old joke:  Moses comes down from the mountain the second time and says, “Well, I’ve got good news and bad news.  The good news?  I got Him down to ten.”

Pause.

“The bad news?…”

“…Adultery stays.”

Rimshot, please

Image:  Rembrandt Harmensz. van Rijn, “Moses smashing the tablets of the law,” 1659.

Explore posts in the same categories: Economic follies, History, Isaac Newton, Newton and the Counterfeiter, Newtoniana, Self-aggrandizement, Uncategorized

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4 Comments on “What I Said — but from someone who knows what he’s talking about: Isaac Newton and Money Manias edition”

  1. Oliver Says:

    I’ve just recently discovered your blog and am enjoying it. You’ve mentioned the Kindle previously, any idea when your new book will be available for the Kindle so I can “buy the damn book”? 🙂 Thanks.

  2. vanrijngo Says:

    You Don’t have to imagine Moses smashing those tablets of the laws we are supposed to live by and by the way Rembrandt had painted Moses holding them. Rembrandt painted these rules for us to see as myths, for he himself had broken damn near every one of them and had given his sole like Faustus did for his life of magic. You can see every bit of his life, his stories, all the happenings in his life time in all his works of art,… right on up until his final days.

    vanrijngo

  3. jane warren daily express Says:

    Hi Thomas
    We are stuck for ways to illustrate the book. Is there a portrait of William Chaloner in existence? please come back to me with any pictorial suggestions.
    Many thanks
    Jane Warren
    Daily Express

  4. euandus2 Says:

    With time, I believe the mathematical “problem solving” orientation of twentieth-century economics will be viewed as piece-meal and insufficient, especially as we look at the viability of the market-mechanism itself in the wake of the financial crisis. Relatedly, Samuelson’s “mathematization” of economics treats the discipline as though it were a science–ignoring the inherent limits to prediction of a human system, whether social, political or economic. For more, pls see http://euandus3.wordpress.com/2009/12/14/paul-samuelson-the-20th-century-economist-has-passed/


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