gresham's law: meaning, definition, pronunciation and examples
LowFormal / Technical
Quick answer
What does “gresham's law” mean?
The economic principle that "bad money drives out good.
Audio
Pronunciation
Definition
Meaning and Definition
The economic principle that "bad money drives out good." When two forms of commodity money are in circulation and are accepted at equal face value, the more intrinsically valuable money (e.g., gold coins) will be hoarded, melted down, or exported, leaving only the less valuable money (e.g., debased coins) in circulation.
Used metaphorically to describe any situation where inferior products, services, or practices become dominant and displace superior ones due to market distortions, poor regulation, asymmetric information, or perverse incentives, especially when they are treated as equivalent.
Dialectal Variation
British vs American Usage
Differences
No significant difference in meaning or usage. Spelling follows the standard possessive ('s).
Connotations
Identical in both varieties; carries connotations of economic history, market failure, and quality decline.
Frequency
Equally low frequency in both UK and US English, primarily confined to economics, finance, and related analytical discourse.
Grammar
How to Use “gresham's law” in a Sentence
Gresham's Law + [verb e.g., states, predicts, operates]Gresham's Law + of + [domain e.g., information, currency]Subject + is/are + a case of Gresham's LawVocabulary
Collocations
Examples
Examples of “gresham's law” in a Sentence
verb
British English
- (Not standard; the term is not used as a verb. Use descriptive phrases like 'be subject to Gresham's Law'.)
American English
- (Not standard; the term is not used as a verb. Use descriptive phrases like 'be subject to Gresham's Law'.)
adverb
British English
- (Not used as an adverb.)
American English
- (Not used as an adverb.)
adjective
British English
- A Gresham's Law dynamic
- a Gresham's Law effect
American English
- A Gresham's Law dynamic
- a Gresham's Law effect
Usage
Meaning in Context
Business
Used to explain why low-quality, low-cost competitors can dominate a market if consumers cannot easily discern quality, or when pricing pressures erode standards.
Academic
A core concept in monetary economics and economic history; also applied in sociology, media studies, and political science to analyze quality degradation.
Everyday
Rare. Might be used in informed discussion about declining quality of products, news media ('clickbait drives out serious journalism'), or public discourse.
Technical
Precise definition relating to bimetallism, coinage debasement, and currency circulation. Used in textbooks and scholarly articles.
Vocabulary
Synonyms of “gresham's law”
Strong
Neutral
Weak
Vocabulary
Antonyms of “gresham's law”
Watch out
Common Mistakes When Using “gresham's law”
- Using 'Gresham Law' without the possessive 's'.
- Confusing it with general inflation or simple price competition.
- Using it as a verb (e.g., 'The market greshamed itself' is non-standard).
FAQ
Frequently Asked Questions
Sir Thomas Gresham (1519-1579) was an English financier and merchant who served the Tudor monarchs. The law is named for him, though the observation predates him.
No. While its original formulation was about commodity money, it is now commonly applied metaphorically to any situation where inferior items drive out superior ones due to a failure to distinguish them in value, such as in information, culture, or product markets.
Sometimes called Thiers' law, it describes the opposite phenomenon: 'good money drives out bad.' This can occur when people lose faith in a debased currency and insist on transactions in sound money, causing the bad money to become worthless and disappear from use.
In its strict monetary sense, it is less relevant for domestic single-currency systems using fiat money (where all notes are equally 'bad' in terms of intrinsic value). However, it remains highly relevant in periods of hyperinflation, in cross-border currency flows, and as a powerful metaphor for quality degradation in other fields.
The economic principle that "bad money drives out good.
Gresham's law is usually formal / technical in register.
Gresham's law: in British English it is pronounced /ˈɡreʃəmz lɔː/, and in American English it is pronounced /ˈɡreʃəmz lɔː/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “It's a Gresham's Law situation.”
- “The market is suffering from a kind of Gresham's Law.”
Learning
Memory Aids
Mnemonic
Think of 'Gresham' as sorting coins: he GREedsily Saves/Hoards the good, precious ones, letting the SHAM (fake/debased) ones circulate.
Conceptual Metaphor
MARKETS ARE ECOSYSTEMS (where inferior species can dominate under certain conditions). QUALITY IS WEIGHT (light, cheap money drives out heavy, valuable money).
Practice
Quiz
What is the core mechanism behind Gresham's Law?