Credit for the first modern theory of the rise and fall of nations belongs to William Playfair, a Scottish engineer, writer and adventurer. It is ironic that Playfair is so little known today, as most of us use his inventions every day, and he pioneered the basic ideas that strategic analysts and political economists rely on. His contributions—and why he was lost to history—are more easily understood when one discovers Playfair, in addition to all his other roles, was a clandestine operator for the British government.
Philosopher, writer, inventor, secret agent: William Playfair was, in effect, the Forrest Gump of the Scottish Enlightenment—seemingly related to everyone by one or two links, turning up at a remarkable number of historic events, and enmeshed in an improbable number of adventures. The difference was that, unlike Gump, William Playfair was, by any measure, brilliant.
Born in Dundee, Scotland, Playfair’s father, a clergyman, died when the boy was just 13. His older brother, John (himself later a famous mathematician and protégé of Adam Smith) took charge of the family and became his tutor. William was first apprenticed in 1773 as a draftsman to Andrew Meikle, an Edinburgh engineer later to become famous for inventing the threshing machine. He moved on four years later to the Soho Manufactory in Birmingham, where James Watt was developing the modern steam engine with his partner, Matthew Boulton. Playfair became an assistant to Watt on the recommendation of clergyman Robert Small, a friend of his late father. Robert Small’s brother, William Small, in turn, was a mentor to Thomas Jefferson at the College of William & Mary. Playfair’s acquaintances at Soho included James Watt, Jr., the inventor’s son, and John Rennie, the noted engineer best remembered for designing London Bridge.
Playfair left Birmingham in 1781 with William Wilson, a partner he met at Soho, and filed several patents for metalworking inventions. The two young men set up a company in London and obtained their own hallmark, the stamp of a licensed silversmith, though the business ultimately failed. It was at about this time that Playfair began to publish pamphlets on economics, politics and foreign affairs.
Playfair’s first known publication was The Increase Of Manufactures, Commerce And Finance, With the Extension of Civil Liberty, Proposed in Regulations for the Interest of Money, which appeared in 1785. The pamphlet, a remarkable work for a young man with little formal education, analyzed British economic and monetary policy, explaining how interest rates and taxation on investment stalled economic growth. In 1787 he published The Commercial and Political Atlas, which most experts agree was the first book to use statistical graphics—specifically, time-series charts depicting the balance of trade between Britain and other nations. Playfair, trained as a draftsman, knew the art of engraving and was apt to see economics in picture form.
Playfair moved to Paris the next year, part of a wave of Britons seeking economic opportunities there under the 1786 Anglo-French commercial treaty, which reduced trade barriers between the two countries. Several copies of the Commercial and Political Atlas had already made their way across the Channel. An English aristocrat gave a copy to a French diplomat who in turn presented it to Louis XVI. The king liked the charts because they made statistics easy to understand, which led to the translation of the book into French and to an invitation for Playfair by Alexandre-Theophile Vandermonde, a noted mathematician, to attend Academy of Sciences meetings in the Louvre.
Playfair’s encounters with the influential and powerful continued apace. He became acquainted with French high society and the American expatriate community, including then-U.S. Ambassador Thomas Jefferson. (Recall Jefferson had a distant connection to the Playfair family via the Small brothers.) Playfair also met Joel Barlow, a Yalie who had achieved celebrity through his epic poem about the rise of America, The Columbiad. Barlow and Playfair became business partners and together inadvertently triggered the first great scandal of American politics. Attempting to sell land in Ohio’s Scioto Valley, to which Barlow’s backers in America did not quite hold clear title, the pair stranded hundreds of French yuppies in the wilds of Ohio. Encouraging immigration was almost as high a U.S. priority as maintaining good relations with France, so bailing out the Parisians was one of the first orders of business when the new Congress convened in Philadelphia.1
Playfair’s restless nature eventually led him beyond commercial ventures. The French king’s patronage notwithstanding, Playfair sympathized with the Republicans. Depending on whose account you believe, he either witnessed or took part in the storming of the Bastille in 1789.2 But he soured on the Revolution when it took a radical turn, a sentiment that in short order led to another career—as a clandestine operator. Secretary at War William Windham secretly put Playfair on His Majesty’s payroll to write anti-Jacobin pamphlets. The first appeared May 1792; about six months later, records indicate Playfair received payments from the British government.3 The British Archives also contain detailed plans Playfair later proposed for an operation to shape public opinion in Britain. The War Office eventually engaged him to publish Revolutionary Magazine, a journal to inform the public of “curious and Interesting Anecdotes and Details” of events in France.4
Playfair’s activities soon got him crosswise with French authorities, and he fled the country via Germany and Holland. En route he chatted up a French émigré in Frankfurt who described the French semaphore telegraph, a system critical to their defenses that could transmit a message across the country in thirty minutes. Playfair made a model of the device and sent it to the Duke of York, at the time Commander in Chief of the British Army.5 Playfair made it back to London in 1793.
Once back in Britain, Playfair proceeded to set up another clandestine operation—an early form of economic warfare. He had earlier proposed that Britain flood France with counterfeit assignats. Later, publishing an analysis suggesting how much paper would be required, he lamented that if only British officials had
taken his advice in the year 1791 in making war upon the credit of France instead of combating her troops . . . we would not have now to arm in England, so many men would not have bled in the field.6
Playfair’s analysis was not just an academic exercise. Sir John Swinburne, a Member of Parliament, wrote of how he discovered a paper mill near Haughton Castle in northern England intended to print bogus assignats. Swinburne, who opposed the ploy, reported that he was told that Playfair managed the operation from London.7 Other reports said that the Duke of York—who, as we have seen, was linked to Playfair—carried counterfeit assignats with him to the continent and distributed the notes by paying his troops with them. The British also gave trunk loads of counterfeit assignats to the émigré army that attacked Quiberon in 1795.
In 1797 Playfair and two partners created the Original Security Bank, one of the first institutions to issue small denomination bills backed by government securities. French inflationary policies had led to a rush on gold, and as a consequence the Bank of England suspended payments in specie. The result was a shortage of hard cash in Britain, which the Original Security Bank was to alleviate. Antiquarians have found a paper mold with “Original Security Bank” watermarks at Houghton Castle, further linking Playfair to the aforementioned clandestine operation there and showing how Playfair took his experience from one exploit and applied it to another. The Bank of England objected to the new bank and had London officials bring charges against Playfair and his partners.
Playfair eventually went free, but with the authorities against him, the Original Security Bank failed and the partners were bankrupted—an all-too-frequent outcome for Playfair’s ventures.
One might debate whether Playfair was, in the modern sense of the word, an intelligence officer, a contractor or a witting asset. But it was a distinction without a difference in an era that predated a formal civil service, and governments often paid journalists under the table. Playfair’s endeavors, as with his fertile mind, cut across intellectual disciplines as well as social and professional dividing lines. His scholarly work in political economy and strategic analysis can only be understood by peering into his world, most notably his personal connections and his first-hand interest in finance, national security and foreign affairs. For him, these elements were all intertwined.
In any case, Playfair soon turned back to writing. In 1801 he published The Statistical Breviary, a 19th century version of the World Factbook the Central Intelligence Agency publishes today. Then, in 1805, Adam Smith’s publisher asked Playfair—who knew Smith through his brother John’s earlier association with him—to edit a new edition of Wealth of Nations, adding commentary and updates.
That same year Playfair took up the issue Smith had raised—why some countries prosper and others do not—and asked the logical follow-on: What causes some prosperous countries, but not others, to decline? The result was An Inquiry into the Permanent Causes of the Decline and Fall of Powerful and Wealthy Nations: Designed to Shew How the Prosperity of the British Empire May Be Prolonged. The book begins with one of Playfair’s engravings, portraying the rise and decline of empires from 1500 BCE to 1805 CE. Playfair described it thus:
It is constructed to give a distinct view of the migrations of commerce and of wealth in general. . . .
I first drew the Chart in order to clear up my own ideas on the subject, finding it very troublesome to retain a distinct notion of the changes that had taken place. I found it . . . [brought] into one view the result of details that are dispersed over a very wide and intricate field of universal history. . . .
Playfair’s Inquiry and the Statistical Breviary should be read as a pair; one provides the theory, the other provides the data. Together, they represent the state of the art in thinking about political economy in the early 1800s. Indeed, Playfair made several specific contributions that are important to how we think about the rise and decline of nations, and one can document a path through which they influenced better-known scholars. They include:
• Statistical databases to describe national capabilities;
• The idea that one could develop a general theory explaining the rise and decline of nations as a function of their policies;
• The concept of comparative advantage;
• The concept of entrepreneurship based on individuals maximizing expected value under conditions of uncertainty, and the linkages between this risk-taking activity, economic growth and national power;
• The adverse, cumulative effects of special interest groups; and
• The concept that a geopolitical balance of power, combined with free trade, minimizes conflict and produces prosperity.
Let us consider each of these ideas in turn.
Statistical databases to describe national capabilities. When scholars refer to Playfair at all today, it is almost always in connection with his inventing the graphic presentation of data, as in the Statistical Breviary. It is easy to miss an equally important invention simply because it is so obvious: The Statistical Breviary provides a country-by-country summary of the capabilities of every country in the world with estimates of their populations, land areas, revenues, size of armies and navies, and so forth. It pre-dates The Statesman’s Yearbook, Whittaker’s Almanac and The World Almanac by sixty years. The Statistical Breviary did not include the United States, but Playfair corrected this by publishing in 1805 the Statistical Account of the United States of America, dedicated to Thomas Jefferson. In effect, this was the predecessor of the present day U.S. Statistical Abstract.
The possibility of a general theory explaining the rise and decline of nations. Playfair explained that he wrote Inquiry partly as a response to Edmund Burke, who did not think such a general theory was feasible because the development of nations is too complex. Playfair said that such a theory was indeed possible because the details of day-to-day events wash out when one takes in the big picture. This is a key assumption that makes theories of political economy possible.
No one seems to have presented such a theory before. Edward Gibbon had looked at a single country in Decline and Fall of the Roman Empire. Adam Smith had looked at the conditions necessary for prosperity in The Wealth of Nations, but did not connect prosperity to a nation’s power and predominance. One can assume that Playfair was trying to echo those books with the title of his own. In Inquiry, Playfair catalogued what he believed was a systematic list of the reasons for the growth and decline of national power. Eventually the field of political economy focused on this problem and took a similar approach, but not until later: James Mill founded the Political Economy Club—which included David Ricardo, Thomas Malthus and other early practitioners—only in 1821.
The concept of comparative advantage. Ricardo is generally credited with introducing the idea of “comparative advantage”, a central concept of economics that underlies arguments for free trade. It refers to the edge that one country has over others in a specified economic activity, and states that the world as a whole benefits most when each nation concentrates on making the things it makes best, or at least those things that it makes “least bad.” As Ricardo wrote in his 1817 book, On the Principles of Political Economy and Taxation,
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature . . . it diffuses general benefit . . . It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England [emphasis added].
Yet Playfair wrote the following analysis ten years earlier in Inquiry; notice the similarity between the two passages, even down to the examples that each author uses:
Variety of soil and climate, difference of taste, of manners, and an infinity of other causes, have rendered commerce necessary. . . . Some nations are situated by nature so as to be commercial, just as others are to raise grapes and fine fruits. . . . Some nations also find it their interest to attend chiefly to agriculture, others may find it necessary to attend more to manufactures; but that ought to be no cause of enmity or rivalship.
Britain . . . sells little of the produce of her soil, and a great deal of the produce of her industry. . . . If France would cultivate her soil with the same care that we attend to manufactures . . . she would be a much richer country than England, without having a single manufacture for exportation. Her wines, brandies, fruits, &c.; &c.; would procure her amply whatever she might want from other nations. [emphasis added].
It is hard to resist the conclusion that Ricardo was much influenced by Playfair. Moreover, Playfair’s argument seems the more expansive and modern. Whereas Ricardo argued that free trade would be efficient trade, Playfair also stressed that free trade would promote peace. He believed that a global economy based on comparative advantage would be more prosperous and thus would avoid the conflict inherent in competition for colonies and the exclusive trading rights that accompany them. Playfair extended his understanding into a principle of geopolitics and national strategy.
Expected value, and the link between risk-taking and growth. Though Adam Smith supported free markets he also believed in limiting interest rates on moral grounds. Jeremy Bentham usually gets credit for making the argument against interest rate ceilings in his 1787 essay, A Defense of Usury. But Playfair was first, and his argument is more relevant for today. Moreover, we know Bentham had read Playfair’s work. In a letter to a friend, Bentham wrote that one of the few discussions he had seen on the subject was a work by Playfair. This seems to have been The Increase Of Manufactures, Commerce And Finance, published two years before Betham’s essay. In his letter, Bentham wrote dismissively,
Nine–tenths of it is bad writation about the origin of society, and so forth: the other tenth is a perfectly vague and shapeless proposal for relaxing the rigour of the anti–usurious laws in favour of projectors. . . . I understand it has been well enough spoken of by several people.8
In 1785 the “projectors” to which Bentham referred were financiers who funded projects—that is, those whom today we call venture capitalists. Playfair was arguing that a government cannot limit upside returns if it expects investors to raise capital for risky ventures. This, of course, is conventional wisdom today. Bentham’s utilitarian argument for usury—the greatest good for the greatest number of people—was philosophical; though utilitarianism is an interesting point of view, Playfair’s argument is a cornerstone of the logic of modern capitalism.
In making his argument against anti-usury laws, Playfair pioneered the use of probability and expected utility to describe financial decisions. Some background puts this contribution in context and makes clear its significance.
Gambling, or course, is as old as antiquity, but the concept of probability dates only to 1654, when Blaise Pascal and Pierre de Fermat presented the basic ideas. Pascal also introduced the concept of expected utility: the net value one can calculate when multiple outcomes are possible for an event. Christiaan Huygens applied the idea to gambling in his 1657 book, Calculating in Games of Chance.9 The formal definition of an expected utility is:
E(U) = p1(x1) + p2(x2) + . . . pn(xn)
where “n” is the total range of possible outcomes, “x” is the cost or benefit of each outcome, and “p” is the probability of each.
The financial world was slow to adopt the concept of a probabilistic return on investment. In Britain, for example, the price of an annuity was not linked to the age of its buyer (and, thus, the likelihood of his death) until 1789. Nevertheless, Playfair used an expected utility equation, described in words rather than symbols, to explain a projector’s calculation when considering this kind of an investment. He wrote in The Increase Of Manufactures, Commerce And Finance:
ALL projecting partakes of the nature of gaming, in a very considerable degree; the risque incurred is of the same nature, and the effect produced on the mind of those concerned is often the same. . . .
PREVIOUS to engaging in any new thing, it is customary to reckon the advantage that will arise from success even among the most sanguine, and to consider what may be the expence of a trial. The more prudent consider the chances. It is not, however, the nature of men, to allow their minds to dwell on the unfavourable parts so long, nor so accurately, as they do on the pleasing and agreeable. The comparison is therefore very seldom made fairly. This is the cause of many failures.
THERE are, besides the circumstances that are usually considered, numbers of others equally necessary to be acquainted with, previous to the undertaking of any new thing. . . .
THE consequences that a FAILURE OF SUCCESS will have upon his circumstances.
THE consequences that SUCCESS will have upon his circumstances.
THESE, then … the chance of gain; the risqué of loss; the probable amount of gain; and the probable extent of loss, make the chief previous considerations.
Playfair argued that if the “consequences of success” were capped, projectors would calculate that the expected value of their investment might not be worth the risk. The idea of expected utility was further developed in the 20th century and became an integral part of economics. Playfair’s calculation is now called a “von Neumann-Morgenstern equation”, after John von Neumann and Oskar Morgenstern, who described it in The Theory of Games and Economic Behavior (1944).
The accumulation of special interest groups and, thus, inefficiencies in mature economies. This concept was part of Playfair’s explanation of why countries declined. Playfair observed how special interests—and their lawyers—accrete as a nation matures:
In a commercial country, so many interests clash, and there are such a variety of circumstances, that the vast swarms of attorneys, who crowd the kingdom, find no difficulty in misleading one of the parties, and that is the cause of most law-suits.
As commercial wealth increases the evil augments, not in simple proportion, but in a far more rapid progression; first, in proportion to the wealth and gain to be obtained, and, secondly, according to the opportunities which augment with the business done.
In addition to the real dead expense, the loss of time, the attention, and the misfortune and misery occasioned by the law, are terrible evils; and, if ever the moment comes, that a general dissatisfaction prevails, it will be the law that will precipitate the evil.
Almost two centuries later Mancur Olson proposed a similar theory, observing how factions in society mobilize to get laws and regulations adopted that provide them benefits but reduce the efficiency of the economy as a whole.10 Playfair also showed how investors seek out countries with favorable environments. He anticipated today’s notions of tax flight and regulatory arbitrage, and of how nations must compete for capital and entrepreneurs.
Proper geopolitical configurations of power combined with free trade will reduce conflict and produce prosperity. In an 1813 monograph, Playfair used the measures of national power he presented in the Statistical Breviary to show how an alliance led by Britain and Russia would stabilize Europe. Britain would provide the military force in the coalition; Russia would provide the people and geographic depth.11
Playfair’s study is unknown to academics today, but it may represent the first example of analyzing grand strategy with quantitative measures. He presented a “Statistical Table” listing the 15 major nations of Europe and their power in 14 variables: area, population, revenues, military personnel and so on. He then showed how the power of a British-Russian alliance would at least match the power of France. The other states would remain in play, but would affect the balance only marginally. Such quantitative analyses did not become common in international studies for another century and a half.
How could a man as adventuresome and accomplished as Playfair have been forgotten by posterity? Though a few recent scholars have rediscovered him, they concentrate almost entirely on his development of statistical graphics.12 Indeed, in their Oxford biography, Ian Spence and Howard Wainer even say that, “After the great inventions of 1786 and 1801 [the publication dates, respectively, of The Commercial and Political Atlas and The Statistical Breviary], Playfair introduced no further innovations of any consequence.” In reality, it was after 1801 that Playfair began his most important works on political economy.
Playfair has been underappreciated partly because his interests were so varied and his life was so outsized. Very few have the combined background of historian, economist, strategic analyst and technician required to take in all his work. We moderns are per force compartmentalized; Playfair was not. Further, as we have seen, Playfair had a checkered reputation and more than one brush with the law. But Playfair is also obscure because so much detective work is needed to understand the extent of his true relationship with the British government. Without this understanding, Playfair is bound to appear less serious and less influential than he really was.
For example, some writers misinterpret Playfair’s assertions that he introduced the telegraph to Britain. They say that Playfair falsely claimed to have “invented” the telegraph, noting to the contrary that others had designed similar systems before him. They miss the point: Playfair was not saying he designed the telegraph; he was describing how he got the plans for the enemy’s communications system, tested them and delivered them to the commander of the British Army. He was discussing espionage, not mechanical invention.
A fuller understanding of Playfair’s connections might have also put some of his other adventures and misadventures in a different light. For example, Playfair claimed he tried to warn the British Foreign Office of Napoleon’s return from exile in 1814 after engaging an émigré in conversation. Most writers dismiss this boast as bizarre, but they do so because they are unaware of similar reconnaissance activities Playfair was involved in few years earlier.13
Playfair’s exploits are also hard to put into conventional context because they are so nuanced. For example, his obituaries say that in 1814 he became the editor of Galignani’s Messenger. Writers today repeat this in passing, as a trifle. But Galignani’s Messenger was the first and most widely read English-language newspaper on the Continent. Published between 1814 and 1904, it was the 19th-century equivalent of today’s International Herald Tribune—and Playfair was the founding editor.
Playfair’s biographers also dismiss his later publications as craven attempts to make money. These include, for example, a multi-volume catalogue of peerages and a collection of short biographies of contemporary political figures.14 Yet one could just as easily say that the former was a predecessor of today’s Who’s Who, and the latter was an early version of the American Political Almanac.
So Playfair inevitably looms less large than he otherwise might. Eulogists who called him a “patriot” at his death were either ignored or misunderstood. Some writers even construed “patriot” as a left-handed compliment for a writer who did not merit the label “scholar.” In fact, one can be both, and the sobriquet summarized exactly what he was.
No significant idea or school of thought develops in total isolation, of course, and Playfair’s contribution was one of many steps in our understanding of world politics. Yet the fact remains that Playfair was the first writer to describe and analyze international relations in a manner that one would find familiar today. And that is why William Playfair, for all his faults, foibles and audacity, should be recognized for what he is: the first modern practitioner of strategic studies and international political economy.
1See Theodore Thomas Belote, The Scioto Spectulation and the French Settlement at Gallipolis (Burt Franklin, 1907) and Journal of the House of Representatives of the United States, 1789–1793 (February 9, 1793).
2”English Actors in the French Revolution”, Edinburgh Review, reprinted in Littell’s Living Age, November 19, 1887. Playfair himself later recounted the event in The History of Jacobinism, Its Crimes, Cruelties and Perfidies (J. Wright, 1798).
3Playfair, A Letter to the People of England on the Revolution in France (J. Debrett, 1792). Playfair implicitly admitted taking payments from the British government in Better Prospects to the Merchants and Manufacturers of Great Britain (Stockdale, 1793), pp. X–XI). Jennifer Mori cites correspondence between Playfair and Windham in “Languages of Loyalism: Patriotism, Nationhood and the State in the 1790s”, English Historical Review (February 2003), p. 48–9, as does James J. Sack, From Jacobite to Conservative (Cambridge University Press, 1993).
4See, in particular, Playfair’s letters of March 26, 1796 and October 24, 1796 in the Windham papers collection at the British Library. The file also includes copies of pamphlets Playfair prepared at Windham’s request. Also see Playfair’s April 24, 1794 letter to the Home Office, reprinted in Arthur Aspinall, Politics and the Press, c. 1780–1850 (Home & Van Thal, 1949), pp. 152–3.
5See Playfair’s account in his Political Portraits in this New Era, Vol. 2 (C. Chapple, 1814), p. 220.
6Playfair, A General View of the Actual Force and Resources of France (John Stockdale, 1793).
7Swinburne’s account, written sometime between 1793 and 1794, is reproduced in John Philipson, “A Case of Economic Warfare in the Late Eighteen Century”, Archaeologia Aeliana (Volume XVIII, 1990), pp. 151-63. Further evidence of the operation appears in Isaac Espinasse, Reports and Cases Argued in the Courts of King’s Bench and Common Pleas (Butterworth, 1801), pp. 388-391. Espinasse cites the case of Strongitherm v. Lukyn in 1795. Strongitherm, an engraver, sued Lukyn, a stationer, for failing to pay for a copper plate Lukyn had ordered; the plate was for forging assignats. Lukyn tried to quash the suit by arguing that, since forgery was a crime, the contract was not binding. The court disagreed, ruling that Strongitherm showed that the forged assignats were for the British government, so the illegality of forgery was no defense and the contract was enforceable.
8Letter from Jeremy Bentham to George Wilson, May 4/15 1787, quoted in the Glasgow Edition of The Works And Correspondence Of Adam Smith (1981–1987) Volume VI: The Correspondence Of Adam Smith—Appendix C, “Jeremy Bentham’s Letters To Smith On The Defence Of Usury (1787, 1790)” (Oxford University Press, 1876).
9See Ian Hacking, The Emergence of Probability (Cambridge University Press, 1975), and David G. Schwartz, Roll the Bones: The History of Gambling (Gotham Books, 2006), pp. 73–91.
10Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Harvard University Press, 1965); and Olson, The Rise and Decline of Nations Economic Growth, Stagflation, and Social Rigidities (Yale University Press, 1982).
11Playfair, Outline of a Plan for a New and Solid Balance of Power in Europe (J. Stockdale, 1813).
12See Edward Tufte, The Visual Display of Quantitative Information (Graphics Press, 1982); and Spence and Wainer’s reprint of The Commercial and Political Atlas and Statistical Breviary (Cambridge University Press, 2005), which contains a biography of Playfair. Also see their entry in the Oxford Dictionary of National Biography (Oxford University Press, 2004), and Wainer’s Graphic Discovery: A Trout in the Milk and Other Visual Adventures (Princeton University Press, 2005).
13Playfair, A Statement, Which Was Made in October, to Earl Bathurst . . . of Buonaparte’s Plot to Re-usurp the Crown of France (Stockdale, 1815). Bathurst was Secretary of State at the time.
14Playfair, British Family Antiquity (Beufort, 1809–11) and Playfair, Political Portraits in this New Æra (C. Chapple, 1813).