Uses and Abuses of Gresham's Law in the History of Money
Introduction
1. Early Expressions
2. Faulty Renderings
3. Good Money Drives out Bad?
4. Cheap Drives out Dear if They Exchange for the Same Price
5. The Replacement of Gold by Credit or Paper Money
6. The Theory of the Breaking Point
7. Richard's Ransom
8. The Great Recoinage
9. Gresham's Law Under Bimetallism
10. Overvalued Money and the Institution of Legal Tender
11. The Evidence of Hoards
12. Conclusions
Paper prepared for publication in the Zagreb Journal of Economics, Volume 2, No. 2, 1998.
The economist H. D. Macleod, writing in 1858, first brought attention to the law that he named after Sir Thomas Gresham:
No sooner had Queen Elizabeth ascended the throne, than she turned her attention to the state of the currency, being moved thereto by the illustrious Gresham, who has the great merit of being as far as we can discover, the first who discerned the great fundamental law of the currency, that good and bad money cannot circulate together. The fact had been repeatedly observed before, as we have seen, but no one, that we are aware, had discovered the necessary relation between the facts, before Sir Thomas Gresham.
This passage errs in two points: Gresham was not the first to make explicit the idea we now know as "Gresham's Law," and the assertion that "good and bad money cannot circulate together" is a glaring error. It is a far cry from Gresham's Law. T无忧论文 【http://www.uklunwen.com】hat Macleod was careless about his statement of the law he named after Gresham serves as a warning that the ideas involved are more subtle than at first appears.
1. Early Expressions .
We can begin this discussion of Gresham's law by outlining some of the highlights of its history. Twenty centuries before Sir Thomas Gresham was born, the elegaic poet, Theognis, born in Megara near Athens, writing in the late 6th and early 5th century BC, wrote some lines suggesting Gresham's Law. Theognis has been described as "an eloquent and strongly biased witness of the struggle of the old aristocracy, for its traditional ideas and ideals which were partly adopted and partly destroyed by the rising lower classes.(1) In a book called Maxims written for his beloved Cyrnus, he informs us that "alloyed gold and silver is easily detected by a shrewd man."(2) More to the point is an earlier comment: "Nor will anyone take in exchange worse when better is to be had."(3)
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