Economics & market laws · law 022
Gresham's Law
Also known as: Bad money drives out good
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
what it means
Bad money drives out good: when two forms of money have the same official value, people hoard the more valuable one and spend the other.
How Gresham's Law works
If silver coins and debased coins are both worth one rupee by law, people keep the silver and spend the debased ones — so only bad coins circulate.
Business writers use it more broadly: in markets where buyers cannot tell quality apart, low-quality offerings can push high-quality ones out, because good suppliers cannot get paid for their extra quality.
where it comes from
Named after Sir Thomas Gresham, financial agent to Queen Elizabeth I in the 16th century. Economist Henry Dunning Macleod coined the term in 1858, though the idea is older.
Gresham's Law examples in business
Used goods
In a second-hand market without inspection, honest sellers of good items leave because buyers will only pay average prices.
Freelance platforms
When clients judge only on price, cheap low-quality bids crowd out skilled freelancers.
Content
Clickbait can crowd out careful reporting when readers cannot easily judge quality before clicking.
How to apply it
- 1If you sell quality, make it visible: certifications, guarantees, demos, reviews.
- 2Educate buyers on how to tell quality apart.
- 3Avoid competing purely on price in a market where buyers cannot see quality.
- 4Build a brand that signals quality so customers do not have to guess.
common misreading
It holds when prices or values are fixed and quality is hidden. When buyers can see quality and prices are free, good money and good products win.
ask yourself
Can your customers see your quality before they buy — or does it look just like the cheap option?
put it into practice
Frequently asked questions
What is Gresham's Law?
Bad money drives out good: when two forms of money have the same official value, people hoard the more valuable one and spend the other. If silver coins and debased coins are both worth one rupee by law, people keep the silver and spend the debased ones — so only bad coins circulate.
Who came up with Gresham's Law?
Named after Sir Thomas Gresham, financial agent to Queen Elizabeth I in the 16th century. Economist Henry Dunning Macleod coined the term in 1858, though the idea is older.
How do you apply Gresham's Law in business?
1. If you sell quality, make it visible: certifications, guarantees, demos, reviews. 2. Educate buyers on how to tell quality apart. 3. Avoid competing purely on price in a market where buyers cannot see quality. 4. Build a brand that signals quality so customers do not have to guess.
What is a common misunderstanding of Gresham's Law?
It holds when prices or values are fixed and quality is hidden. When buyers can see quality and prices are free, good money and good products win.