Published by EH.NET (August 2010)

George Selgin, Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821: Private Enterprise and Popular Coinage. Ann Arbor, MI: University of Michigan Press, 2008. xvii + 345 pp. $40 (cloth), ISBN: 978-0-472-11631-7.

Reviewed for EH.NET by John Wood, Department of Economics, Wake Forest University.


This book is an absorbing and informative study of the intersection of the industrial revolution and the development of the British coinage, particularly the private sector?s solution, over the government?s obstruction, of ?the big problem of small change.?? It treats the problem, its causes and consequences, the (mainly profit) incentives to solve it, and the contributions of technology and competition to its solution.?

The scarcity of small-value coins hindered efficient exchange in the rising market economies from the Middle Ages until well into the nineteenth century.? Their scarcity was due to several reasons, including the technological infeasibility of sufficiently small gold, silver, and even copper coins, their disappearance because of differences between nominal and market values, and hoarding induced by their liquidity premia.? Fundamentally, the problem was due largely to the government?s failure to address it — not for technological reasons, Selgin points out, but to the complacency and inefficiency of the Royal Mint, compounded by its refusal, erratically enforced, to let others supply the need because of the belief that money was a royal prerogative.

Costly consequences of the scarcity included time-consuming searches for coins to meet payrolls, non-monetary payments (often of disputed values) to workers in lieu of cash, and credit by retailers, on little security, until feasible amounts accumulated, and delays in wage payments for the same reason.

In a discussion of ?making do,? Selgin describes the private ?production and circulation of all sorts of unofficial substitutes, including large quantities of counterfeit copper coin.? Some members of Parliament wanted to crack down on counterfeiting and all other extra-legal coins, without addressing their causes, while others argued that they assisted exchange.? They were certainly used by conscious agents.? Most of these token coins were redeemable in gold or silver by the issuing firms who needed them primarily for payrolls.? Of course the workers who received them as wages found them useful for purchasing small items.? They greased the wheels of exchange.? Understandably, the button-makers of Birmingham, interestingly described by Selgin, became the largest token manufacturers.

?The story of Great Britain?s commercial coinage is, above all … a story of the initiative of local authorities, companies, and individuals in the face of state ineptitude.? But it is also,? and this is in some ways the most interesting part of the book, ?the story of intense and often cutthroat competition among the commercial token makers themselves.?? We learn much of the workings of the industrial center of Birmingham, especially of the industrial giant Matthew Boulton and others who raced against each other to make the best and most profitable coins.? The book is about more than money.? It is also about the industrial revolution at work.

The big problem of small change was, if not completely solved, at least greatly alleviated by the competition between manufacturers during the decades leading up to the government?s reclamation of its monopoly in 1818, when private coins were declared illegal and the government was able to assume the job because of a refurbished mint and the belated realization that coins did not have to contain their intrinsic value in metal.?

It is useful to compare the solution described by Selgin with that of Sargent and Velde (The Big Problem of Small Change, Princeton University Press, 2002), who began their study by asking whether the solution of the problem was delayed because of ?poor economic theory or inadequate technology.?? In fact, as they acknowledged at the end of their study, it was neither.? Like Selgin, they found that the government simply continued the system that had been privately developed.? The solution was seen in the seventeenth century, and applied by Boulton and others in the eighteenth century.? It did not have to wait for the steam technology of the nineteenth century.? Profits were seen before that.

Nor is an understanding of the quantity theory — by which the government regulates the supply of coin to produce a given value or price level — necessary, despite Sargent and Velde?s suggestion.? The quantity of money is determined by its demand in non-fiat systems, with the price level determined by the relative cost of producing money and goods.? Private profit-seekers do not need to know economic theory to supply the demand for tokens (or any other kind of money) as long as a profit can be made.?

This careful and interesting book is highly recommended to those who wish to understand the development of the solution of the ?big problem of small change? in Britain or the workings of a market during the industrial revolution — that is, to macro- and micro-economists alike.? Or to anyone who likes a good story.


John Wood, Reynolds Professor of Economics at Wake Forest University (, is author of A History of Central Banking in Great Britain and the United States (2005) and is working on a comparison of classical and current macroeconomics.

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