What monetary law states that bad money drives out good money?

What monetary law states that bad money drives out good money? Gresham's law states this principle. When two forms of money must be accepted at the same face value, people tend to spend the money with lower intrinsic value and hoard, melt, or export the more valuable money.

“Good money” traditionally means a coin whose metal value is relatively close to its official value. “Bad money” may be debased, clipped, counterfeit, or otherwise worth less as a commodity than its face value. If legal-tender rules force both coins to circulate at equal value, the better coin disappears from ordinary transactions.

The law was named in 1857 by economist Henry Dunning Macleod after Sir Thomas Gresham, a sixteenth-century English financier. Gresham explained the effects of debased English coinage, but the underlying observation is older: Nicolaus Copernicus and classical writers described similar monetary behavior.

A common mistake is treating the slogan as universal. It generally requires fixed exchange values or legal-tender rules. Where people can choose freely, bad money may be rejected instead; the reverse tendency is sometimes called Thiers' law.