Compound Interest Corrected: The Imaginative Mathematics of the Financial Future in Early Modern England

What is money in the future worth today? In the seventeenth century, questions about the “present value” of future wealth became matters of practical concern, as businesspeople and governments deployed future-oriented financial technologies like mortgages, bonds, and annuities. Those questions also attracted the attention of mathematicians. This essay examines the excursions two English mathematicians, the indefatigable mathematical gossip John Collins (1625–83) and the lesser-known Thomas Watkins (fl. 1710s–20s), made into the mathematics of financial time. In capitalist practice today, present-value problems are invariably dealt with using a single technique, compound-interest discounting, which has become deeply embedded in commercial, governmental, and legal infrastructures. Yet, for early modern thinkers, the question of how best to calculate the financial future was an open question. Both Collins and Watkins explored imaginative alternatives to what would become the compound-interest orthodoxy. With help from his network of correspondents, Collins explored simple-interest discounting, which provoked thorny mathematical questions about harmonic series and hyperbolic curves; Watkins crafted multiple mathematical techniques for “correcting” the compound-interest approach to the financial future. Though both projects proved abortive, examining those forgone futures enables us to examine the development of a key element of capitalistic rationality before it became “black-boxed.”