The Gresham's Theory of Bad Money vs Good Money.

Bad Money Drives Out Good Money Meaning

Definition: If both low-quality and high-quality currencies exist in an area or market together, people will keep the high-quality currency for themselves and only use the low-quality currency with each other.

A good way to think about this proverb is to think about counterfeit and legal currency. If there is a counterfeit or inflated currency in circulation, people will hoard their genuine currency and only use the counterfeits in order to preserve the thing of true value.

Another way this idiom can be used is in the case of two legal forms of currency that are recognized to have the same value by a government. If one of these two forms is considered to be of higher value by the general public, the “higher” value currency will be hoarded, and only the “lower” value currency will be circulated.

For example, if a gold coin and a paper bill are both valued at $100, the public will save the gold to keep for themselves and use the paper money to buy commodities. This phenomenon is also known as Gresham’s law.

The expression bad money drives out good money can also be used metaphorically for any object, product, or skill that eliminates more valuable counterparts. For example, now that many products are produced cheaply, higher-quality versions of those same products are hard to find.

What Does Bad Money Drive Out Good Money Mean? - Writing Explained