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Salvaging Gresham's Law: The Good, the Bad, and the Illegal

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  • Selgin, George

Abstract

Contrary to the claims of Arthur Rolnick and Warren Weber, Gresham's Law is not a 'fallacy.' Nor does it rest on the unrealistic assumption of an operational fixed (disequilibrium) exchange rate between two economically distinct monies. Here I interpret Gresham's Law as a result of coercive legal tender laws aimed at discouraging agents from discriminating among alternative monies. Such laws can systematically drive 'good' money out of circulation by placing buyers and sellers in a Prisoner's Dilemma in which the use of 'bad' money represents a unique noncooperative equilibrium. I offer some historical examples, which are not readily explainable using Rolnick and Weber's proposed alternative to Gresham's Law. Copyright 1996 by Ohio State University Press.

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  • Selgin, George, 1996. "Salvaging Gresham's Law: The Good, the Bad, and the Illegal," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 637-649, November.
    • Handle: RePEc:mcb:jmoncb:v:28:y:1996:i:4:p:637-49
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    Cited by:

    1. John H. Munro, 2009. "Coinage and Monetary Policies in Burgundian Flanders during the late-medieval 'Bullion Famines',. 1384 - 1482," Working Papers tecipa-361, University of Toronto, Department of Economics.
    2. Vincent Geloso & Mathieu Bédard, 2018. "Was Economic Growth Likely in Lower Canada?," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 33(Fall 2018), pages 1-23.
    3. Li, Ling-Fan, 2009. "After the Great Debasement, 1544-51: did Gresham’s Law apply?," Economic History Working Papers 27874, London School of Economics and Political Science, Department of Economic History.
    4. Easton, Steve, 2007. "Valuing coins as the sum of the underlying asset and a perpetual American put option," Global Finance Journal, Elsevier, vol. 17(3), pages 397-402, March.
    5. Bryan P Cutsinger & Vincent Geloso & Mathieu Bédard, 2022. "The wild card: colonial paper money in French North America, 1685 to 1719 [Economic Structure and Agricultural Productivity in Europe, 1300–1800]," European Review of Economic History, European Historical Economics Society, vol. 26(2), pages 185-207.
    6. Juan E. Castañeda & Sebastian Damrich & Pedro Schwartz, 2024. "Parallel Currencies under Free Floating Exchange Rates: A Model Setting Out the Conditions for Stable Currency Competition," Economies, MDPI, vol. 12(10), pages 1-20, September.
    7. Max Raskin & Fahad Saleh & David Yermack, 2020. "How do Private Digital Currencies Affect Government Policy?," World Scientific Book Chapters, in: Bernard Yeung (ed.), DIGITAL CURRENCY ECONOMICS AND POLICY, chapter 12, pages 111-115, World Scientific Publishing Co. Pte. Ltd..
    8. Gary Pecquet & Clifford Thies, 2010. "Money in occupied New Orleans, 1862–1868: A test of Selgin’s “salvaging” of Gresham’s Law," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(2), pages 111-126, June.
    9. Lawrence J. White, 2020. "Antitrust Economics And Consumer Protection Economics In Policy And Litigation: Why The Disparity?," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1555-1564, October.
    10. Prateek Saxena, 2020. "Comments on “Cellular Structure for a Digital Fiat Currency” — Cellular DFC Design: Technological Perspectives," World Scientific Book Chapters, in: Bernard Yeung (ed.), DIGITAL CURRENCY ECONOMICS AND POLICY, chapter 11, pages 103-109, World Scientific Publishing Co. Pte. Ltd..
    11. Y. -Y. Kim, 2004. "Gresham's law in the late Chosun Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 11(15), pages 979-984.

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