Sir Isaac Newton, the Economist at the Royal Mint
Although Newton didn’t contribute much to economic theory directly (and was instead involved in the practical end of economics rather than social science and theory), Newton did put his mathematical and chemical knowledge to use at the Royal Mint saving England money they were losing on counterfeit coins.
In his years at the Mint, Newton (by then in his 50’s) left behind physics and the other sciences (and his less talked about interest in theology and alchemy) and embraced his new role as English Aristocracy while focusing on economics, personal investments, and social relationships.
Neil deGrasse Tyson: My Man, Sir Isaac Newton. A quick introduction to Newton by deGrasse Tyson.
TIP: Newton was involved in economics, but in a very practical and statesmen-like way, his major direct contributions are in mathematics and the natural sciences before his work at the Mint. See the works of Newton, including Opticks (read online) which he began work on in 1675, and published while working at the mint in 1704.
Newton Inspired Economists and Other Thinkers Outside of the Natural Sciences
Newton may not have contributed much to economics directly, but he did inspire important economists including both the father of modern economics Adam Smith and the Father of social-liberal macroeconomics John Maynard Keynes (see Isaac Newton’s Influence on Adam Smith’s Natural Laws in Economics). He also made friends with the father of liberalism and a co-founder of classical liberal economics John Locke. Locke’s theories use the state of nature argument to show the origin of the natural rights regarding life, liberty, and property, and he was instrumental in The Glorious Revolution of 1688 (a political revolution that gave more power to parliament; see the 1689 English Bill of Rights and Locke’s 1689 work Two Treatise of Government) and became the model for liberal revolutions. The Revolution greatly impacted economics in Europe and America, and could have easily affected Newton being awarded his position at the mint.
FACT: Newtown wasn’t the only famous philsopher to dabble in economics. As noted above, Locke helped develop the concepts of supply and demand and the Price Labor Theory, Copernicus was the first to present the Quantity of Money Theory, and Adam Smith wrote a book on moral philosphy which he considered his greatest work (his invisible hand concept oriniates in his Theory of Moral Sentiments, not his Wealth of Nations).
Newton and the South Sea Bubble
Newton was also an investor; he famously lost a great deal of money in The South Sea Bubble (1716-1720) along with Thomas Swift (who wrote Gulliver’s Travels).
In short this bubble was caused when Britain issued shares in their South Sea company, a state-backed company that was granted a monopoly in trade with Spain in South America, to pay off their war debt. The problem came when shares raised in value through speculation and then lost value when the voyages turned up with little to nothing and relations with Spain soured.
When the South Sea Bubble popped, it caused a very severe economic crisis. Proud citizens like Newton had been happy to hold large shares of Britain’s trademark company, but when the bubble popped Newton personally lost a fortune in the crash (£20,000, equivalent to about £268 million in present day value), he famously remarked, “I can calculate the movement of the stars, but not the madness of men.”
The Takeaway on Newton and the South Sea Bubble
Indeed, Newton’s time as an economist should remind us all that the universal laws that govern the natural sciences and mathematics are much more ordered than the rather chaotic laws that govern the social sciences (like economics, political science, and psychology).
In other words, discovering calculus and the laws of motion can seem easy compared to predicting the South Sea Bubble for those who are looking at the world mathematically instead of through the lens of the social sciences.
South Seas Bubble of 1720: the First Major Manipulation of Financial Markets. The story of the South Sea Bubble.
TIP: Read more about the South Sea Bubble here. Also… learn more about how to predict bubbles, in overly simple terms, the trick is being able to notice when an asset with little-or-no value is being over-speculated.
Newton the Alchemist and John Maynard Keynes
Speaking of riches gained and lost, aside from being an economist, Newton was also one of the last alchemists.
Newton spent a large portion of the first half of his life (before working at the Mint) searching for “the philosophers stone” (a fabled chemical substance that can be used to create gold, not an actual stone) and trying to find deeper meaning in ancient esoteric and theological texts.
After studying his manuscripts (some of which economist John Maynard Keynes, who bought the manuscripts, was one of the first to see), Keynes wrote a famous line about Newton, “he was the last of the magicians.”
TIP: It’s likely that Keynes suspected that he would find some unpublished economic theory by Newton (and if he did, he certainly never told anyone). Instead, Keynes found out about the secret life of Sir Isaac Newton (see the link for an in-depth overview of Newton as Keynes knew him after reading his unpublished manuscripts).
Secret Life Of Isaac Newton – New Documentary HD. The story of Keynes and Newton’s unpublished manuscripts.
“He possessed in exceptional degree almost every kind of intellectual aptitude – lawyer, historian, theologian, not less than mathematician, physicist, astronomer.” – Keynes on Newton