The Big Problem of Small Change available in Paperback, eBook
The Big Problem of Small Change
- ISBN-10:
- 0691116350
- ISBN-13:
- 9780691116358
- Pub. Date:
- 11/23/2003
- Publisher:
- Princeton University Press
- ISBN-10:
- 0691116350
- ISBN-13:
- 9780691116358
- Pub. Date:
- 11/23/2003
- Publisher:
- Princeton University Press
The Big Problem of Small Change
Buy New
$53.00Buy Used
$37.97-
-
SHIP THIS ITEM
Temporarily Out of Stock Online
Please check back later for updated availability.
-
Overview
One big problem had long plagued commodity money (that is, money literally worth its weight in gold): governments were hard-pressed to provide a steady supply of small change because of its high costs of production. The ensuing shortages hampered trade and, paradoxically, resulted in inflation and depreciation of small change. After centuries of technological progress that limited counterfeiting, in the nineteenth century governments replaced the small change in use until then with fiat money (money not literally equal to the value claimed for it)—ensuring a secure flow of small change. But this was not all. By solving this problem, suggest Sargent and Velde, modern European states laid the intellectual and practical basis for the diverse forms of money that make the world go round today.
This keenly argued, richly imaginative, and attractively illustrated study presents a comprehensive history and theory of small change. The authors skillfully convey the intuition that underlies their rigorous analysis. All those intrigued by monetary history will recognize this book for the standard that it is.
Product Details
| ISBN-13: | 9780691116358 |
|---|---|
| Publisher: | Princeton University Press |
| Publication date: | 11/23/2003 |
| Series: | The Princeton Economic History of the Western World , #12 |
| Edition description: | New Edition |
| Pages: | 392 |
| Product dimensions: | 7.00(w) x 10.00(h) x (d) |
About the Author
Table of Contents
| List of Illustrations | xiii | |
| List of Tables | xv | |
| Preface | xvii | |
| Acknowledgments | xxi | |
| Part I | A Problem and Its Cure | |
| 1. | Introduction | 3 |
| Paper and gold | ||
| The enduring problem of small change | ||
| A model | ||
| Supply side: the mint | ||
| Demand side: the coin owner | ||
| Shortages | ||
| Price level determination | ||
| Remedies | ||
| A history | ||
| Structure of subsequent chapters | ||
| 2. | A Theory | 15 |
| Valuation by weight or tale | ||
| A basic one-denomination theory | ||
| Multiple denominations | ||
| Supply | ||
| Demand | ||
| Interactions of supply and demand | ||
| Economics of interval alignments | ||
| Perverse dynamics | ||
| Spontaneous debasements: invasions of foreign coins | ||
| Costs and temptations | ||
| Opportunity cost | ||
| An open market operation from Castile | ||
| An open market operation for the standard formula | ||
| Transparency of opportunity cost | ||
| Trusting the government with b[subscript i] = 0 | ||
| 3. | Our Philosophy of History | 37 |
| History and theory | ||
| Clues identified by our model | ||
| Cures | ||
| Our history | ||
| Part II | Ideas and Technologies | |
| 4. | Technology | 45 |
| Small coins in the Middle Ages | ||
| The purchasing power of a small coin | ||
| The medieval technology: hammer and pile | ||
| Production costs and seigniorage | ||
| Mechanization | ||
| The screw press | ||
| The cylinder press | ||
| Other inventions | ||
| The steam engine | ||
| Counterfeiting, duplicating, imitating | ||
| Technologies and ideas | ||
| 5. | Medieval Ideas about Coins and Money | 69 |
| Medieval jurists as advocates of Arrow-Debreu | ||
| Romanists and Canonists | ||
| Construction of the medieval common doctrine | ||
| Sources and methods of the romanists | ||
| Money in a legal doctrine of loans | ||
| Tests in a one-coin environment | ||
| Multiple currencies and denominations | ||
| Multiple denominations | ||
| Multiple metals | ||
| Fluctuating exchange rates: the stationary case | ||
| Multiple units of accounts | ||
| Demonetization | ||
| Overdue payments and extrinsic value | ||
| Trends in exchange rates | ||
| Debasements and currency reforms | ||
| A question from public law: setting seigniorage rates | ||
| Sources of the canonists | ||
| Debasements and seigniorage rates | ||
| Qualifications, exceptions, and discoveries | ||
| Early statement of double coincidence | ||
| Romanists repair the breach | ||
| Canonists versus romanists on seigniorage | ||
| Another breach | ||
| Philosophers help | ||
| The cracks widen: debasements and deficit financing | ||
| Concluding remarks | ||
| 6. | Monetary Theory in the Renaissance | 100 |
| Precursors of Adam Smith | ||
| Debt repayment, legal tender, and nominalism | ||
| Dumoulin the revolutionary | ||
| Dumoulin's impact | ||
| Dumoulin the conservative | ||
| Fiat money | ||
| Fiat money in theory: Butigella | ||
| Double coincidence of wants revisited | ||
| Other formulations | ||
| Fiat money in practice | ||
| The conditions for valued fiat money | ||
| Restrictions on fiat money | ||
| Limited legal tender | ||
| Quantity theory | ||
| Lessons from the Castilian experience: fiat money | ||
| In Spain: Juan de Mariana (1609) | ||
| Forecasting inflation | ||
| In France: Henri Poullain (1612) | ||
| Concluding remarks | ||
| Part III | Endemic Shortages and "Natural Experiments" | |
| 7. | Clues | 123 |
| Shortages of small change and bullion famine | ||
| Shortages and invasions of coins | ||
| Ghost monies and units of account | ||
| Free minting | ||
| The evidence | ||
| 8. | Medieval Coin Shortages | 131 |
| England | ||
| France | ||
| Shortages elsewhere | ||
| Concluding remarks | ||
| 9. | Medieval Florence | 139 |
| Turbulent debut of large coins in Tuscany | ||
| The Quattrini affair | ||
| Ghost monies as legal tender and unit of account | ||
| Florentine ghost monies: details | ||
| Concluding remarks | ||
| Appendix A | Mint equivalents and mint prices | |
| Minting | ||
| Appendix B | A price index for fourteenth-century Florence | |
| 10. | Medieval Venice | 160 |
| Four episodes | ||
| Piccolo and grosso, 1250 to 1320 | ||
| Evolving units of account | ||
| Silver and gold, 1285 to 1353 | ||
| Adaptation of units of account | ||
| Soldino and ducat, 1360 to 1440 | ||
| Rehearsing fiat money | ||
| The torneselli in Greece | ||
| Expansion near Venice | ||
| Concluding remarks | ||
| Appendix | Mint equivalents and mint prices | |
| 11. | The Price Revolution in France | 186 |
| Relative price change as inflation | ||
| Disturbances to coin denominations | ||
| A three-coin model | ||
| Supply: movements in the relative prices of metals | ||
| Demand: within the intervals shortages | ||
| Anatomy of money and inflation | ||
| Types of coins and units of account | ||
| The price level | ||
| Supply: the relative price of gold and silver | ||
| Debasement of billon coins | ||
| Mysterious movements in exchange rates | ||
| Evidence of small coins shortages | ||
| Policy responses | ||
| Perception of the problem by the authorities | ||
| Unit of account and legal tender | ||
| Units of account and international trade: the fairs of Lyon | ||
| The reform of 1577 | ||
| Collapse of the reform | ||
| Concluding remarks | ||
| Appendix | Mint equivalents and mint prices | |
| 12. | Token and Siege Monies | 216 |
| Precursors of the standard formula | ||
| Medieval tokens | ||
| Siege money | ||
| Convertible token currency: an early experiment | ||
| First attempt at standard formula | ||
| Part IV | Cures and Side-effects | |
| 13. | The Age of Copper | 227 |
| The coinage of pure copper | ||
| Experiments in many countries | ||
| 14. | Inflation in Spain | 230 |
| Elements of the standard formula | ||
| The Castilian experiment | ||
| Monetary manipulations | ||
| Restamping | ||
| Crying down coins | ||
| Theory of the Castilian tokens | ||
| Additional notation | ||
| Multiple regimes | ||
| More learning: aspects of indeterminacy | ||
| The evidence | ||
| The end of the token coin experiment | ||
| Comparison with inflation during the French Revolution | ||
| Unintended consequence for Sweden | ||
| Concluding remarks | ||
| Appendix | Money stocks and prices | |
| 15. | Copycat Inflations in Seventeenth-Century Europe | 254 |
| France: flirting with inflation | ||
| Catalonia | ||
| Germany | ||
| Russia | ||
| The Ottoman empire | ||
| 16. | England Stumbles toward the Solution | 261 |
| Free-token and other regimes | ||
| Laissez-faire or monopoly: England's hesitations | ||
| Private monopoly (1613-44) | ||
| Laissez-faire | ||
| The Slingsby doctrine | ||
| Government monopoly | ||
| The Great Recoinage of 1696 | ||
| The monetary system under the Restoration (1660-88) | ||
| The crisis | ||
| A model with underweight coins | ||
| The Locke-Lowndes debate | ||
| The Great Recoinage | ||
| Locke: genius or idiot? | ||
| 17. | Britain, the Gold Standard, and the Standard Formula | 291 |
| The accidental standard | ||
| Laws and ceilings | ||
| The guinea and legal tender laws | ||
| Newton's forecasts | ||
| Gold becomes the unit of account | ||
| Underweight coins | ||
| Neglect the pence | ||
| Implementation of the standard formula | ||
| 18. | The Triumph of the Standard Formula | 306 |
| Germany's monetary union of 1838 | ||
| Bimetallism versus the gold standard | ||
| Bimetallism in a small country | ||
| Worldwide bimetallism | ||
| Passage to gold | ||
| The United States | ||
| The Latin Monetary Union | ||
| Free riders in monetary unions | ||
| The accident of 1873 | ||
| The standard formula limps into place | ||
| 19. | Ideas, Policies, and Outcomes | 320 |
| Evolutions of ideas and institutions | ||
| Our history | ||
| Experiments | ||
| Major themes | ||
| Beliefs and interests | ||
| Units of account and nominal contracts | ||
| Small change and monetary theory | ||
| Currency boards, dollarization, and the standard formula | ||
| Learning by markets and by governments | ||
| Part V | A Formal Theory | |
| 20. | A Theory of Full-Bodied Small Change | 335 |
| 21. | The Model | 337 |
| The household | ||
| Production | ||
| Production of goods | ||
| Production of coins | ||
| Government | ||
| Timing | ||
| Equilibrium | ||
| Analytical strategy | ||
| The firm's problem | ||
| Implications of the arbitrage conditions for monetary policy | ||
| Interpretations of [sigma subscript i] | ||
| Full-weight and underweight coins | ||
| The household's problem | ||
| 22. | Shortages: Causes and Symptoms | 350 |
| Equilibria with neither melting nor minting | ||
| Stationary equilibria with no minting or melting | ||
| Small coin shortages | ||
| Small coin shortage, no minting or melting | ||
| Permanent and transitory increases in [xi] | ||
| Logarithmic example | ||
| Money shortages bring inflation | ||
| Shortages of small coins through minting of large coins | ||
| Shortages through melting of full-weight small coins | ||
| Perverse effects and their palliatives | ||
| 23. | Arrangements to Eliminate Coin Shortages | 366 |
| A standard formula regime | ||
| Variants of the standard formula | ||
| The standard formula without convertibility: the Castilian experience | ||
| Fiat currency | ||
| 24. | Our Model and Our History | 373 |
| Glossary | 375 | |
| References | 377 | |
| Legal Citations Index | 393 | |
| Author Index | 395 | |
| Subject Index | 399 |
What People are Saying About This
This marvelous book is a fascinating and thoroughly original combination of economic theory, economic history, and the history of economic thought. In it, Sargent and Velde set out a simple, modern framework for thinking about monetary systems in which several denominations of currency circulate at once. They then use this framework to illuminate the workings of a huge variety of monetary arrangements in use from the Middle Ages to the present, and to trace the evolution of our understanding of the principles of monetary management. This is applied economics at its best.
— Robert E. Lucas, Jr., University of Chicago, 1995 Nobel Laureate in Economic Sciences
It is rare to be able to say of a book that it is not only of considerable importance from a scholarly point of view, but that it is also well written and aesthetically pleasing. Yet that is precisely the sort of book this is. The Big Problem of Small Change is also unusually clear and has none of the apparent obfuscation that other scholars accuse economists of practicing. Most scholars get confused when dealing with mint ratios, Gresham's Law, seigniorage rates, and so on. Amazingly, however, this is a book that will please even the most numismatically challenged among them.
— Joel Mokyr, Northwestern University
This collaboration between a prominent economic theorist and a very learned historian of European monetary thought and experience yields a rather unusual book, one that may herald the way the world is going. To an economist and financial historian, this is pretty interesting stuff.
— Richard Sylla, New York University
"This marvelous book is a fascinating and thoroughly original combination of economic theory, economic history, and the history of economic thought. In it, Sargent and Velde set out a simple, modern framework for thinking about monetary systems in which several denominations of currency circulate at once. They then use this framework to illuminate the workings of a huge variety of monetary arrangements in use from the Middle Ages to the present, and to trace the evolution of our understanding of the principles of monetary management. This is applied economics at its best."—Robert E. Lucas, Jr., University of Chicago, 1995 Nobel Laureate in Economic Sciences"Thomas Sargent and François Velde have written a quiet masterpiece. The Big Problem of Small Change solves a nearly thousand-year old puzzle in monetary economics, it is a beautiful economic history, and a brilliant piece of intellectual history, showing how important ideas are in economic affairs."—John H. Cochrane, University of Chicago"It is rare to be able to say of a book that it is not only of considerable importance from a scholarly point of view, but that it is also well written and aesthetically pleasing. Yet that is precisely the sort of book this is. The Big Problem of Small Change is also unusually clear and has none of the apparent obfuscation that other scholars accuse economists of practicing. Most scholars get confused when dealing with mint ratios, Gresham's Law, seigniorage rates, and so on. Amazingly, however, this is a book that will please even the most numismatically challenged among them."—Joel Mokyr, Northwestern University"This collaboration between a prominent economic theorist and a very learned historian of European monetary thought and experience yields a rather unusual book, one that may herald the way the world is going. To an economist and financial historian, this is pretty interesting stuff."—Richard Sylla, New York University
Thomas Sargent and François Velde have written a quiet masterpiece. The Big Problem of Small Change solves a nearly thousand-year old puzzle in monetary economics, it is a beautiful economic history, and a brilliant piece of intellectual history, showing how important ideas are in economic affairs.
— John H. Cochrane, University of Chicago