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This isn’t an example of Gresham’s law. Gresham’s law effects decisions that are hard to evaluate before making and which have a price/quality trade-off. The ba
by AbrahamParangi 6y ago
This isn’t an example of Gresham’s law. Gresham’s law effects decisions that are hard to evaluate before making and which have a price/quality trade-off. The bad drives out the good by means of the decision maker being unable to discern ahead of time which thing is good (and so making bad things is more profitable than good and soon no good things are made).
- dredmorbius 6y agoSource or references? This isn't how Gresham's law is typically discusses AFAIA. (It is how I consider it, hence my interest.)
- tlb 6y agoYou may have a postmodern version in mind, but the actual Gresham’s law doesn’t involve any hard decisions. It says that when using coins made of precious metals, people will always spend the lightest coins they have. A perfectly rational and simple behavior that causes all the circulating coins to be underweight.
- AbrahamParangi 6y agoThis is still the same phenomenon. In your example it is the seller who has to decide to accept (or not accept) your currency and the buyer is incentivized to give the lowest value currency. To use the car salesman analogy, in your example the buyer is selling lemons and the seller is deciding to buy.
- zug_zug 6y agoAfter reading the wikipedia article, I agree. I don't see what the parallel could be for "good information" being taken "out of circulation" by hoarders (since it's non-fungible). Perhaps he intended something like https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons, that can explain people pitching bad ideas as credible due to information asymmetry.