Gresham's Law

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Gresham's law:

see under Gresham, Sir ThomasGresham, Sir Thomas
, 1519?–1579, English merchant and financier. As the royal financial agent in Antwerp after 1551 he proved himself very able, though his methods were frequently more effective than ethical.
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Gresham's Law

(ECONOMICS) the hypothesis, associated with the Elizabethan merchant-financier, Sir Robert Gresham, that ‘bad money tends to drive good money out of circulation’, where ‘bad money’ is money which contains less bullion value for a stated face value than ‘good money’. The ‘law’ is particularly of interest as an early, archetypal, example of many laws in economics which assume individuals act rationally (see FORMAL AND SUBSTANTIVE RATIONALITY). see also IDEAL TYPE.

Gresham’s Law


an economic law, formulated by the 16th-century English statesman and financier T. Gresham, that states: “Bad money drives out good.” Actually this principle was known before him, as it had been noted that, upon circulation of coins of the same nominal denomination but different value, the lower-value coin assumes the function of circulating currency while the higher-value coin is hoarded, melted down into ingots, or taken abroad. For metal currency, this law had already been formulated by N. Copernicus in 1526. A full scientific analysis of the phenomena stated in Gresham’s law is given by the Marxist theory of money (see K. Marx, Contribution to the Critique of Political Economy, as well as Das Kapital, vol. 1, ch. 3).

The action of Gresham’s law is typical for bimetallism when, upon the legal establishment of a value ratio for gold and silver (for instance, 1:15), both gold and silver coins of appropriate weight and with the same nominal exchange value are freely minted from private metal reserves. When the market price of silver falls, say to a ratio of 1:20, it becomes profitable to exchange only silver coins. Gresham’s law also acts in the case of inflation: with the devaluation of paper money resulting from overissue, the population hoards gold and silver coins while the paper money usually remains in circulation.

References in periodicals archive ?
So it is clear that in this suffocating climate created by Erdoy-an's regime that gives the impression of being a mafia-like gang by suspending the rule of law, democracy, freedom of enterprise and the inviolability of private property, bad money drives out good money.
Why should they forfeit their chances at getting easy money and not grab the public funds in their control and put the same in their personal bank accounts when the voters of Sindh keep on re-electing them election after election in spite of all kinds of sex and financial scandals: Makhdoom Amin Fahim was re-elected after forty million rupees bad money was found in his account.
Rose says the most important point he wants readers to get is to not dwell on bad money decisions they've made in the past.
Davidson in his articles points out "if you change the technology but not the method of learning, then you are throwing bad money after bad practice.
Walny says these average paid athletes are left on their own and increasingly vulnerable to bad advice, bad money decisions, and the potential for financial ruin.
So if you''re a mother or father of a young child then be warned: you need to add bad money managementto the list of things not to do in front of the kids.
It's not bad money, but not what it used to be," he admitted.
He believes in making bad money from whatever source it comes.
I didn't like it enough for the bad money," she said.
Knowing how to manage and make decision on money matters is among major growing challenges across the world, he noted, Good management and decisions on spending money could lead to success and on the other hand bad money management and decisions could lead to disaster.
What we need now is a primer on the major misconceptions in the hope that, unlike Gresham's Law, which says that bad money drives out good money, good economics will drive out bad economics.
This type of trust can be used for any type of problem such as addictions, or just bad money management.