The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’

“The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).


“Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what Gresham’s Law amounts to as a theoretical statement and not merely as an empirical generalization. The empirical generalization that “bad money drives out good” of course goes back to classical antiquity when it seems to have been so familiar that Aristophanes could assume that he would be readily understood when he applied the idea to good and bad politicians. It is pure accident that this empirical rule became attached to the name of Gresham, and as a mere empirical rule it is practically valueless. I remember that’s in monetary disturbances of the early 1920s, when people began to use dollars and other solid currencies in place of a rapidly depreciating Mark, a Dutch financier asserted that Gresham’s Law  was wrong and that it was in fact the other way round and it was the good money that drove out the bad.

If Gresham’s Law is properly stated with the conditions in which it applies, it will appear that as a proposition of calm positive social theory it can indeed provide a useful tool of historical explanation.”

Free Online Version