John Law: A Scottish Adventurer of the Eighteenth Century. By James Buchan. MacLehose Press; 528 pages; £30.

FORGET share prices, interest rates and GDP. A better measure of the severity of a financial crisis is who is paying attention. If only financiers are watching, it is probably a manageable blip. When politicians start to notice, it is time to be concerned. When artists become interested, panic.

As the 18th century dawned, the attention of one of France’s greatest writers was held fast by the finances of its capital. “Have you all truly lost your heads in Paris?” exclaimed Voltaire in horror. “Nobody talks of anything but millions.” Beggars were now rich, he wrote, and the rich were destitute. Daniel Defoe thought the French seemed to have converted “refined air” into profit. Voltaire offered a different suggestion: perhaps they had “found the philosopher’s stone in the mills of paper”.

He was eerily close to the mark. The mania was the work of John Law, a Scottish economist, who had indeed bragged that he had found the philosopher’s stone—though in his view the trick was to “make gold out of paper”. When Law took charge of France’s finances, he promptly did just that, promoting paper money and a financial bubble that inevitably burst.

Law, as James Buchan explains in this exceptionally thorough biography, was a gambler in life as much as in finance. The son of an Edinburgh goldsmith, he matured first into a troublesome youth, then, by the age of 23, into an outlaw: having killed a man in a duel he was given leg fetters and a death sentence. In 1695 he escaped from prison and fled to Holland.

It was an exciting time to be an economist abroad. Ever since Caesar had marched across Gaul, money in France had meant metal, mainly silver (hence “argent”). But in the financial markets of Holland and Italy, money was evolving with astonishing speed. Behaving less like silver than quicksilver, it was mutating from hard metal to lines on paper or entries in a book. What mattered was not coinage but confidence. Dreaming of financial revolution, Law wrote a pamphlet titled “A Proposal for Supplying the Nation with Money”.

He caught the eye of the French regent, the duc d’Orléans. France was desperate for cash. Costly wars and Louis XIV’s profligacy meant that, as one soldier put it, the “Treasury is absolutely empty.” A miracle was needed—and the alchemical Law was on hand to provide it. The regent hired him and, in 1720, made him controller general of the king’s finances. France watched in awe as paper money was printed and shares in its new joint-stock company, which administered the Louisiana colony, rocketed; the word “millionaire” appeared.

Then the bubble burst. Confidence in Law’s paper money crumbled. There was a run on the bank; several investors were crushed to death while trying to have their paper turned back into silver. The Louisiana company’s shares tanked.

Mr Buchan chronicles the collapse in gruesome detail. The French were aghast as money and shares were transformed yet again, this time into what a Dutch cartoon called “wind and smoke”. Montesquieu satirised money’s reputation in a sketch in which a man moans about lending his friend some. His complaint wasn’t that the loan vanished but that “the rat paid it back! What abominable perfidy!”

Law’s system had failed. The “richest citizen there has ever been” was ruined. But he may have got his revolution, just not the one he wanted. Some historians think the French revolution itself was the indirect consequence of the state in which he left the country’s finances.