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Source link: http://archive.mises.org/17688/greshams-law-in-manners/

Gresham’s Law of Manners, or how socialism gives us a rude society

July 12, 2011 by

Economics students all over the world learn Gresham’s Law in a severely distorted way. They are told that “bad money drives good money out of the market” as if that was a law of markets. It’s not. It’s a law (inevitable effect) of State intervention in the money market. Bad money drives good money out of the market only when the former is subject to a price control that sets its price higher than it would otherwise be with respect to the latter’s. In other words, valuable goods are hidden/hoarded whenever there is forced equality or at least the least valuable are forced upwards in perceived value.

What does this have to do with manners? Well, if we regard all State property (public areas specially) as the tragedy of the commons it is, we can analyze people’s behavior as more or less valuable. In a free society, people of great manners (and overall superior personal image) will tend to surround themselves with similar people. But in partial socialism, access to public venues is increasingly non-discriminating (of behaviors and attire and even hygiene) thus making a melting pot out of different human groups. The problem is, that some people are put off by others’ behaviors and personal presentation. Rudeness and even perceived aggressiveness scares away families and vulnerable individuals (women with a high sense of femininity, to name one). This we may call Gresham’s Law of Manners: the progressive abandonment of public spaces by the most elegant and sober and its crowding out by the vulgar and aggressive. The State creates this situation and then it’s intelligentzia deplores the abandonment of public/community spaces by some groups who now have to seclude themselves in gated neighborhoods and other discreet spaces in other to enjoy a life of kindness, beauty and truth.

This law of human behavior only goes on to further demonstrate how civic life and personal values are eroded by the State, in the vein of prof. Hans-Hermann Hoppe’s great analytic framework.


Servius July 12, 2011 at 1:24 pm

Speaking of hoarding good money and Gresham’s Law, I was reading a book on the middle ages, particularly the 12th and 13th centuries and it mentioned that people were hoarding gold at one point and also spoke of bank failures and a crash that followed a boom period. The author is no economist and certainly not an Austrian.

Does anyone know of a work on economics of this time from an Austrian perspective.

augusto July 12, 2011 at 2:08 pm

Didn’t Rothbard write a series of books covering pre-Adam-Smith economics?

Servius July 12, 2011 at 2:38 pm

If it’s the one I think it is that’s on pre-Adam-Smith economic thought. I’m looking for an Austrian discussion of the boom and bust cycles of the middle ages in particular the effect of the Medici banks when a boom occurred, when the bust occurred, etc.

augusto July 12, 2011 at 4:17 pm

oh, right… Well, from the top of my head all I can think of now is “40 centuries of inflation and price controls” (available in pdf), but I can’t remember whether it covers the specific topic you mentioned.

Jeremy July 12, 2011 at 10:51 pm

Money, Bank Credit, and Economic Cycles – By Jesus Huerta de Soto. It talks about the Medici boom and bust.

Servius July 13, 2011 at 8:37 am

Awesome. Thanks for the replies.

HL July 12, 2011 at 1:48 pm

I am old enough to remember public parks as rather civilized places in the Bronx prior to the great social reforms of our beloved uppper classes. Within the space of a summer, no respectable kid or adult could be found near a public park at any time, day or night. Hooligans ruled the roost.

My current home town is starting to experience this, too.

Tick tock, it’s a matter of time.

Bruce Koerber July 12, 2011 at 3:43 pm

True Economic Science Includes Ethics.

This phenomenon is unquestionably a result of a socialist mentality which is not unrelated to the ego-driven interpretation that occurs as a result of empiricism. And to go further, economics that is separated from ethics is unscientific since it removes the true nature of the human reality; with the consequence being a lack of validity, thereby opening the door wide for the ambitious ego-driven interpreters and interventionists.

That is why free market economics is more than laissez-faire. It is not just a principled argument, and in fact it is beyond mere intellectual argument because it is in its true nature a divine institution that is subject to corruption by any and all human economic intervention.

That corruption shows up as bad fruits such as the ones noted above with regards Gresham’s Law of Manners.

Capn Mike July 12, 2011 at 5:19 pm

Thus was born the Giuliani myth.

“He chased the lowlifes out of Times Square and made it family friendly”.

Actually, it was the Fed-fueled boom that drove Manhattan real estate valuations through the roof and priced the scumbags out of New York and into Paterson.

But yes, Times Square IS nicer. (or less bad).

Giovanni P July 12, 2011 at 6:24 pm

Awesome. This post makes a good book.

Big Brother July 12, 2011 at 9:10 pm

The State creates this situation and then it’s intelligentzia deplores the abandonment of public/community spaces by some groups who now have to seclude themselves in gated neighborhoods and other discreet spaces in other to enjoy a life of kindness, beauty and truth.

It’s just a step from that to “we gotta do something”, like forcing people back into those abandoned public spaces.

Ryan Vann July 13, 2011 at 11:49 am

Excellent post. I’ve attempted to explain that Gresham’s law applies to very specific currency regimes more times than I should have cared to.

Marcus Kalka July 13, 2011 at 3:31 pm

Interesting post. Definitely an interesting and thought-provoking take on Gresham’s Law.

Topher July 14, 2011 at 3:26 pm

I agree, great post. Thanks!

Dagnytg July 15, 2011 at 6:29 am

Though I agree with the essence of the article, I like this quote from a recent article by Leland B. Yeager -Gresham’s Law operates: “the inferior human currency drives the better one out of circulation”

I would say that statement is true regardless of whether the state intervenes or not. Gresham’s rule, broadly speaking, tends to apply to everything. In other words, when things become easily accessible they become common and standards tend to fall.

It should be noted that this outcome is not always a negative for society. In fact, many businesses succeed because they cater to this outcome.

Take for example mises.org. I’ve noticed a big drop off in comments …especially from people I have blogged with over the last few years. Most of those people were hardcore anarchists like myself. Even the well-versed minarchists seemed to have left. Why?

From a mises.org perspective, you’re not going to grow your business catering to the hardcore anarcheo-libertarian. If you want to attract a broader audience, you need to change the types of articles you post, change your format, and hope you attract fewer hardcore libertarians; replace them with a broader (though less passionate) audience and henceforth increase donations as well as spread the message. (There’s no point in preaching to the choir.)

In the end, Gresham’s Law operates all the time and everywhere with good and bad outcomes. Though when applied in a sociological sense, one needs to be careful in their interpretation of what is superior and inferior. Subjective analysis like “manners and superior personal image” can lead one down that slippery slope called fascism.

Dagnytg July 15, 2011 at 6:41 am

by the way…fifth paragraph, first sentence, should read anarcho-libertarian…

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