For those of you who haven’t studied economics-Greshams Law is the priciple that people will hoard currency of greater intrinsic value, and that lower-intrinsic valued currency (like paper dollars vs. gold dollars) will circulate (in preference to the more-desireable gold).
Does this"law" also apply to commerce as a whole? Take pizza-the DOMINO’S chain seems to be driving all of the independant pizza shops out of business-yet DOMINO’s pizza is LOUSY! Also in the food realm-we see fast food (which is a very low quality) displacing the “Ma and Pa” family restaurants>
What is going on here-are economies like ares predisposed to favor low quality goods over high-quality? Why is it that the lowest-quality vendors seem to be winning all of the time?
Weel applying Gresham’s law in that case really is not appropriate, because Gresham’s law involves hoarding higher quality money and ridding yourself of lower quality money. I don’t see people hoarding higher quality pizza and disposing of low quality pizza.
But what of the problem you describe, low-quality beating out high-quality. Well there are really several ways to answer the question, but the first is to debate the premises in the first place. Is Domino’s truly inferior? Are independent pizza vendors really being driven out? Inferiority is a question of tastes and of course you cna explain anything by using tastes, but then again you aren’t really expalining anything.
No let’s go on the premise that Domino’s does indeed serve an inferior pizza, i.e if Domino’s and Joe’s Pizza are an equal option than Joe’s is chosen.
Well there can be two explanations, the more traditional explanation is that prices can be used to explain this. The Domino’s is cheaper, to the point where folks are willing to essentially “sell” back some pizza quality and use that money for something else.
The second, less traditional expalantion is a problem of information. The consumer simply is not informed of all their choices, either because it is too costly for cosnumres to get it, or too costly for producers to inform the consumer (although this explanation can also be dispensed with in prices, to become equal, they need to spend more and raise their prices.)
I think that Gresham’s Law has been generalized in popular conception to the point where it arguably applies to pizza.
In general terms, Gresham’s Law says that people will hold on to a good product and distribute a bad product if they can get away with it. So, people will pay for things in paper, not gold, if merchants will accept the paper.
In the same way, pizza parlors will sell lower quality pizza if such pizza is accepted by the public. In loose terms, bad pizza would drive good pizza out of circulation. If you were trying to make a living delivering gourmet pizza, places like Domino’s might very well drive you out of business, so to speak.
Not really a example of Gresham’s Law, but it’s an interesting phenomenon. Mass-produced items have been driving out hand-crafted objects of beauty in areas like cars, furniture, homes, clothing, as well as food, for years because a) they’re much more affordable, and b) quality is more consistent.
Consumers trust brands because they can be certain of a consistent quality of goods/service. They are also influenced by advertising and marketing tactics that mom & pop outlets can’t match (children, especially).
Sure would be a sight if you did!
I don’t think Gresham’s law really provides any insight on why paper circulates instead of gold. We use a paper currency because gold is an extremely stupid choice for currency if one cares anything about a sane monetary policy. It’s heavy, it’s easy to fake, it’s hard to measure for large transactions, etc.
Worst of all, gold, regardless of whether it is currency or not, is a good who’s world price fluctuates entirely of its own accord, which would be sort of like having an activist monetary policy that makes its decisions almost at random, regardless of whether rapidly expanding or contracting the money supply is really a good idea at any given point in time.
And it is important to realize that currencies are not the same things as goods. If I burn my house down, the world as a whole is one house poorer. But if I burn paper bills with a dollar value equivalent to the price of my house, the world as a whole is NOT any poorer or richer. I perosnally am poorer, but the world is richer by exactly the same amount (since what has essentially happened is that I have abdicated my litterally “on paper” claim on a certain share of the goods and services that the world produces)