Gresham’s Law
Bad money drives out good - meaning that debased or underweight coins will drive good money out of circulation as people squirrel away the more valuable coins in mattresses and other hiding places.
The law was named in 1857 by H. D. Macleod, a Scottish economist, who thought that Sir Thomas Gresham, sixteenth-century London merchant founder of the Royal Exchange and financial adviser to the Crown, had been the first to state the principle. But Macleod was wrong. The law had been understood and explained by earlier monetary theorists, including Nicolaus Koppernick who doubled as an astronomer and who is better known as Copernicus. Even the ancient Greeks were familiar with the principle. Thus, Aristophanes noted how brass coins replaced gold in The Frogs, a play that was first produced in 405 B.C. only a couple of centuries after the invention of coinage in Lydia (ca. 630 B.C.). From the translation by Dudley Fitts:
“Yet, there are sensible men and good in Athene’s city. True as ancient coin gold against modern brass.”
The principle embodied in Gresham’s Law has widespread applications. Thus, Terry Teachout proposed a variant which he called ‘Grisham’s Law’ (after bestselling novelist John): “In popular culture, trash gets trashier over time” (New York Times Book Review, August 27th 1995). Other authorities have reached similar conclusions. Speaking of the communications business, Lee Loevinger, a onetime FCC commissioner, said “Bad news drives good news out of the media” (in Paul Dickson, The Official Rules 1978) while Marvin Kitman, glomming onto a truth as humorists are wont to do, pointed out that “Pure drivel tends to drive ordinary drivel off the TV screen” (Arthur Bloch, The Complete Murphy’s Law 1991).
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