Gresham's Law applies to a bi-metal monetary standard where the ratio of the values of the two metals are set by the government, or to the situation when the face value of a coin is less than its melt value.
I should fix that wikip, the philosophy has more profound implications than the narrow interpretation to which you adhere.
At the time the term was coined (ahem) many currencies were private. It was not government only. That is a recent deviation.
In the years Wikipedia has existed, that circumstance was largely unknown.
The only problem is those other interpretations do not have the empirical verification the "narrow" interpretation has.
Gresham's law observes how people behave when some entity tries to force them to act as if two non-equal items have equal value. It's an expression of how the individual preferences which make up a market express themselves even in a situation of coercion.
Some of people like to improperly generalize this into something entirely different, for reasons which tend to appear self-serving.
This post was sort of funny because it starts by defending the "narrow" interpretation.
The second sentence rephrases it to a "broader" interpretation"
And the third vilifies the generalization of the second.
It left me confused so I have to ask...
Your notion of what is "improper" here is curious, but I will bite your cookie to learn its taste. Please tell us what term you use to describe the general notion of "bad money drives out good" if you are going to constrain your personal definition of the phrase to "bad government money drives out good government money within a bi-metallic system"?
http://www.britannica.com/EBchecked/topic/245850/Greshams-lawWhat is the proper generalization, please?
I am happy to change my mind, so long as the change makes things better. But being pedantic for its own sake is a bit bothersome.
"Money functions in ways other than as a domestic medium of exchange; it also may be used for foreign exchange, as a commodity, or as a store of value. If a particular kind of money is worth more in one of these other functions, it will be used in foreign exchange or will be hoarded rather than used for domestic transactions."
To me this parses as:
1) If money (such as Bitcoin) is worth more as Foreign Exchange than a medium of exchange, it will be used in foreign exchange or hoarded rather than used for domestic transactions. (your proper definition)
and
2) If money (such as Bitcoin) is worth more as a store of value than a medium of exchange, it will be hoarded (used as a store of value) rather than used for domestic transactions.
and
3) If money (such as Bitcoin) is worth more as a commodity than a medium of exchange, it will be used as the commodity or hoarded rather than used for domestic transactions.
For example of the narrow, if you look at the legal tender denominations on American Eagle coins (Silver ounce US$1, Gold ounce US$50, Platinum ounce US$100) these are hoarded rather than used for domestic transactions due to the perceived value being greater than the legal tender value.
For example of the broad, every trade made where you have a choice of payment method.
I am also curious about the assertion of appearance of Self-Serving reasons. Would you care to expound on that or are you satisfied to simply cast aspersions on those people who improperly generalize (are we both guilty, both innocent, or neither)?
