| | On that blog, I posted this comment:
I know Thomas J. Sargent's work, The Big Problem of Small Change, co-authored with Francoise Velde. On the NumisSociety message board, I noted:
"Sargent and Velde compiled an impressive fund of stories, largely from the Middle Ages when there was a plethora of freely circulating independent coinages. They document frequent famines in penny coins (and fractions for them) -- and the ineffective countermeasures. This book opened my eyes to medieval commerce. That said, I had some difficulties. Despite four classes in university economics, I could not always follow their theoretical explanations for the events. The Cato Institute had the same problem."
(See here under "Trusted Sources.")
I reviewed the book for The Celator, a magazine dedicated to ancient (pre-1453) numismatics.
Marotta, Michael E. “Sargent, Thomas J. and Françoise R. Velde. The Big Problem of Small Change. Princeton, Princeton University Press, 2002.” The Celator 17.3 (March 2003), pp. 34.
Despite the difficulty of their theories, one claim that I understood was their position that making change should be cost-free. The "problem" they cited was that a groat (grosso, groschen) might weigh four or six pennies, but you might get only three or five pennies for yours or seven or 11 pence for two, etc. In other words, small change was "over-valued" in their opinion. The solution was simply to mint more pennies but of lesser fineness. But the problem was too often perceived as a shortage of grossi, causing local officials to mint ever more, but (here's the problem) of lower fineness. They were trying to stretch the silver supply as well as trying to keep large coins in circulation while at the same time pennies from all over circulated widely at fairs and other trade centers.
The Austrian solution is clear to us. Sargent and Velde had a different model.
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