Lately I've been exploring historical episodes of private coinage - rare instances in which governments allowed private mints to flourish. Economists have almost universally tended to support governments' traditional coinage "prerogative," claiming that private mints would tend to issue inferior and irregular coins. They often appeal to Gresham's Law, according to which bad coins will tend to drive good coins out of circulation. But Gresham's Law is more properly understood as explaining what tends to happen when governments do monopolize coinage while trying to force the public to accept bad (debased or lightweight) coins. On this see my EH.net Encyclopedia entry on "Gresham's Law" and my JMCB article " Gresham's Law: The Good, the Bad, and the Illegal" - JSTOR link.)

Far from giving effect to Gresham's Law, the private coinage episodes I have looked at so far tended to have the opposite effect, with mints producing inferior coins being forced out of business by their more reputable rivals. The private coinage episode that followed the discovery of gold in California is a relatively well-known instance of this.

A less well-known episode took place during the first, critical decades of Great Britain's industrial revolution. The Royal Mint struck hardly any copper or silver coins after 1775, and so left British industry without decent official money with which to pay workers, who typically made less than 15 shillings a week. In 1787 a major industrialist began issuing his own copper pennies and halfpence, and soon a private coinage industry consisting of more than 20 independent mints, most of which had been started by former metal button makers located in Birmingham, was supplying most of Great Britain's small change. The story of how private industry managed to solve problems that had thwarted the Royal Mint's own attempts to supply small change, and of how the government eventually re-asserted its coinage prerogative, forms the subject of my recently-published book, Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821 (University of Michigan Press and the Independent Institute). Here are some blogs concerning the book, from Marginal Revolution and the Mises Economics Blog. Here is the YouTube video of my my F.A. Hayek Lecture, "The Private Supply of Money," concerning the theme of book.

An early version of the manuscript for Good Money included a "Ramble 'Round Old Birmingham," which takes readers on a numismatic tour of Birmingham in 1829. Time-travel affecionados can take the tour by clicking here.

Two recent works, Angela Redish's Bimetallism (Cambridge University Press 2000) and Thomas Sargent and Fran├žois Velde's The Big Problem of Small Change (Princeton University Press 2002) discuss Britain's 18th-century small-change problem and how it delayed the emergence of the gold standard. Both mention the private copper coinage, but wrongly assume that its success was due to the invention, by Matthew Boulton, of the steam-driven coining press rather than to the competitive nature of the private coinage regime. My Economic History Review paper, "Steam, Hot Air, and Small Change: Matthew Boulton and the Reform of Britain's Coinage." (Blackwell-Synergy link) refutes this view and explains the real reasons behind the superiority of the private copper coinage. A second paper, "The Institutional Roots of Great Britain's 'Big Problem of Small Change" (forthcoming in the European Review of Economic History) blames the persistance of Great Britain's small change problem on the monopolistic nature of its official coinage system.

Government authorities continue to this day to make a botch-job of coinage, as is evident from Argentina's recent experience, which I discuss briefly in "Argentina is Short of Cash--Literally" (The Wall Street Journal, January 5, 2009). If you think my article exaggerates the situation there, have a look at this video documentary.