Good Money: Birmingham Button Makers, the Royal Mint,
and the Beginnings of Modern Coinage 1775-1821

by George Selgin

Product Details:
Hardcover: 390 pages
Publisher: University of Michigan Press (July 14, 2008)
Language: English
ISBN-10: 0472116312
ISBN-13: 978-0472116317
Product Dimensions: 9.1 x 6.2 x 1.4 inches
Shipping Weight: 1.6 pounds

Reviews:

courtesy amazon.com
by Richard Doty, ~ Curator of Numismatics, Smithsonian Institution

"In lucid, enjoyable, often humorous language, Selgin takes us from the 'dark satanic mills' to the backstreet haunts of the eighteenth-century counterfeiter and the private, legitimate mints, set up to address a problem the Royal Mint could or would not - the production of safe small change for the people. His cast of characters is large and auspicious: Thomas, Williams, James Watt, John Westwood, and Matthew Boulton. And Selgin's understanding of eighteenth-century economic theory and practice is absolute, allowing him to write with verve and clarity."

courtesy History News Network
by Jeffrey Rogers Hummel, Department of Economics, San Jose State University

"The alleged solution to this recurrent problem that plagued medieval and Renaissance commerce was what has come to be known as the standard formula. Small-denomination coins, rather than being full-bodied, should be tokens with a metallic value well below their face value but freely interchangeable at a fixed exchange rate for large-denomination, full-bodied gold coins (or under today’s monetary regimes, for fiat currency). Although seemingly simple, the standard formula was not widely implemented until the nineteenth century. The British government supposedly adopted it in 1816, while the U.S. government waited until at least 1853. Some monetary historians have suggested that it took a long time for theorists to devise and appreciate the formula, whereas others claim that viable token coinage had to await technological innovations that would make it difficult for counterfeiters to flood the market with fraudulent tokens. But nearly all have agreed that only the State could successfully institute the standard formula.

What Selgin’s meticulous and wide ranging research reveals is that this last assumption is exactly backwards for Great Britain, the first country to implement the standard formula. The British government mainly hindered and sabotaged the development of token coinage, which instead arose privately. Not only had the Royal Mint’s mispricing of silver effectively eliminated any new silver coinage by the end of the eighteenth century, but the mint had discontinued copper coinage as well. This only encouraged counterfeiting of the mint’s inconvertible copper coins. The counterfeit coins at least provided some monetary services and by the mid-1750s already accounted for at least half the copper in circulation. All this was taking place at the outset of the Industrial Revolution, as the economy’s monetary needs were rapidly expanding in response to the enormous shift of workers from the farms to factories and the unprecedented growth of retail trade. At a time when the daily laborer’s wage averaged between one or two shillings (twelve to twenty-four pence) per day, a monetary system in which the smallest, non-counterfeit coin readily and widely available was the gold half guinea (equal to ten and a half shillings) hardly proved adequate. Nor could paper money fill the gap, since the artificially privileged Bank of England did not issue banknotes of less than five pounds (one hundred shillings), and Parliament soon outlawed the issue of small-denomination notes by other banks.

It was private entrepreneurs—not the Royal Mint—who finally alleviated the shortage with “tradesmen’s tokens” or “commercial coins,” beginning with copper “Druids” issued by the Parys Mining Company in 1787. Although a 1672 legal prohibition on private tokens was still on the books, it was unenforced, since the private tokens made no pretence of being coins from the mint, and indeed were noted for distinctive and exquisite designs. Within a decade there were a score of private mints, which had struck more copper coins than the Royal Mint had produced over the previous half century. Many of the new mint masters were button makers from Birmingham. It was also private entrepreneurs—not the Royal Mint—who curtailed counterfeiting with superior die engravings, producing high-quality coins of uniform roundness and milled edges. As a result, private entrepreneurs—not the Royal Mint—were the first to offer small-denomination coins fully redeemable for money of higher denominations. Nor did these counterfeit-proof coins require the development and employment of the steam-driven press, as Redish and Sargent-Velde believe. Only Matthew Boulton’s Soho mint used steam presses, meaning that most of the eighteenth-century private tokens were manufactured without it. While many of the less familiar tokens circulated only locally, those issued by large-scale manufacturing and mining companies with good name-brand capital achieved nationwide acceptance. Despite not being legal tender, private tokens became so reliable that they generally commanded a 100 percent premium over any Royal Mint copper coins remaining in circulation. Indeed, Selgin makes a persuasive claim that, without private coinage, Britain’s transition into sustained economic growth with its reliance on wage labor would have been stifled.

Indeed, the current, international financial crisis might cause Selgin to retract his concession that current monetary thought is "well suited toward tinkering with existing government-controlled monetary systems.” Events have brought the Federal Reserve System, along with general notions of government-managed currencies and centrally planned interest rates, under increasing criticism. Unfortunately, even as radical and insightful a contribution as Been Steil and Manuel Hinds’s recent Money, Markets and Sovereignty, which persuasively argues that nationalistic fiat moneys are ultimately incompatible with economic globalization, buys into the myth that government was needed to implement the standard formula. Despite Steil and Hinds’s recognition that it is a “textbook fiction” (using the phrase of monetary theorist Robert Mundell) that the State played any essential role in money’s origin, they still write that “governments needed to impose a single commodity anchor, such as gold coins or bills redeemable in gold, and to make smaller denominations into limited-supply tokens, convertible into the commodity anchor at a fixed rate guaranteed by the government.” Yet if government intervention is truly necessary to solve the big problem of small change, how will it ever be possible to achieve an international money free from the machinations of the nation-State? 8

The overarching value of Selgin’s study, then, is to offer a concrete illustration of how voluntary interaction on the market solved a complex monetary problem and of why governments were the primary source of the problem in the first place. We can only share his hope that “perhaps awareness of Great Britain’s commercial coinage experience will help nudge [monetary] thought onto less well-traveled paths” (p. 305).