Background and Context
Shares in the new Bank of the United States went on sale on the Fourth of July, 1791. Within weeks merchants and tradesmen in Philadelphia and New York were trading the rights to them, and in the middle of August the prices broke. Hamilton's Treasury bought securities to steady the market, and by the end of the month it had steadied, for the moment; it would break once more in September before it settled.
That is when Jefferson wrote to Gouverneur Morris, a New Yorker who had spent much of the previous year in London sounding out the British government for Washington and was still in Europe on business of his own. The money gets one short paragraph, set between a report on an expedition against the Indian nations of the Northwest and a note on British treaty talk.
Interpretation
The passage turns on the word vocation. Jefferson opens with two trades being abandoned: shipowners leaving their vessels tied up because a voyage now pays too slowly, and a tailor putting down his needle and thimble. He closes on a trade being taken up, the gamester's. His complaint is that speculation had stopped being something people did in a hot month and become something they did for a living.
That is his answer to "they say the evil will cure itself." The people saying it meant the crash: prices had fallen, speculators had lost money, and the fever would break on its own. Jefferson grants that prices correct. He doubts that people do. A loss teaches a lesson only to someone who reads it as a verdict. To a man who has made gambling his trade, a loss is the trade's ordinary bad weather — "the disasters of his vocation" — and he keeps working through it.
Current Relevance
The distinction Jefferson draws, between a market that corrects and a gambler who doesn't, is now standard in the study of gambling. Chasing losses, coming back after losing to win the money back, is one of the diagnostic criteria for gambling disorder in the American psychiatric manual, the DSM-5. In the people most attached to the game, a loss prompts more play.
The argument Jefferson was answering hasn't gone away either. After a bubble breaks, someone usually says the losses will teach the lesson, and they usually mean prices.
Impact and Legacy
The passage met its test within the year. William Duer, who had served as Hamilton's assistant at the Treasury, kept speculating after the 1791 break, borrowing heavily in an attempt to corner the market in government debt and bank stock. His collapse in March 1792 set off a panic in New York, and he spent most of the rest of his life in debtors' prison. Two months after the panic, two dozen New York brokers signed the Buttonwood Agreement, setting rules for their trade — the founding document of what became the New York Stock Exchange. Jefferson's gamester got his case study, and the vocation got a rulebook.
Contrasting Views or Controversies
In 1791 vocation often meant only an occupation or line of business, with no sense of a calling. On that sense "the disasters of his vocation" is simply "the losses of his trade," and the case for a new profession being born rests on the ships and the tailor more than on the word.
On the larger question, the self-cure camp had the better of it. The scrip market settled within weeks, Hamilton's credit held, and the ships didn't stay at the wharves for long: once war broke out in Europe in 1793, American shipping boomed as a neutral carrier through the rest of the decade. Jefferson would say he meant gamesters, and the economy was never his claim. Whatever the gamesters did, the country's commerce went on.
Practical Application
- Individual: after a loss, notice whether it changed your plan or only your next stake. If the one lesson drawn was to win it back, the loss wasn't treated as information.
- Anyone whose side venture is turning into an identity: ask whether you'd quit it after a bad year. If the honest answer is no, you're already reading its losses as weather.
- Organizational: a team that files every failed bet under "the cost of doing business" should be able to name the result that would make it stop. A risk that no outcome could end has become a habit.
- Civic: when someone argues that a speculative mania will cure itself, ask whether they mean prices or people. The two recover on different schedules, and a policy aimed at one does little for the other.
Background on the Author
Thomas Jefferson (1743–1826) was the third president of the United States, from 1801 to 1809, and the principal author of the Declaration of Independence. A Virginia planter and lawyer, he was Washington's first Secretary of State when he wrote this letter, and he left that office at the end of 1793 after repeated clashes with Hamilton over the Treasury's program. He died at Monticello on July 4, 1826, fifty years to the day after the Declaration was adopted.
His fullest statement of economic outlook came in Notes on the State of Virginia, first printed in 1785: "Those who labour in the earth are the chosen people of God." He held that a nation of farmers was the safest foundation for a republic, and he kept that view through his time in office.