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>...when the costs of distinguishing good foo from bad foo are high... Ah, there's the part I was missing. I didn't think of it beyond government regulation. I

• dredmorbius 12y ago
  It seems to arise out of several possible factors. In the case of money, it's the statutory definition of value. Since specie has value independent of the nominal value (though usually below nominal, hence, seigniorage), where there's a positive, valuable metals are hoarded. In most of the other instances noted, value determination is by other means, some set by market, some by difficulty in full value assessment. But in all cases there's an informational asymmetry, where the party who's aware of the true value of a good (or service) may choose to act in ways which maximize benefits (or minimize losses) that are both 1) not fully captured in market value and 2) aren't accessible to the counterparty.