CMFA No. 003 WORKING PAPER 2021 The Private Mint In Economics: Evidence from American Gold Rushes Lawrence H. White Professor of Economics, George Mason University, and Senior Fellow, Cato Institute March 17, 2021 CMFA Working Papers are intended to circulate research in progress for comment and discussion. In cases where publishers require the removal of working papers, the paper will be removed and updated with a notice of publication. Comments can be emailed to
[email protected]. For more information, please visit www.Alt-M.org. The private mint in economics: Evidence from the American gold rushes Lawrence H. White* Department of Economics, George Mason University
[email protected] Abstract: Given a gold or silver standard, some economists have supposed that the private minting of coins is socially inefficient because, due to information asymmetry, private coins will be chronically low in quality or underweight. An examination of private mints during gold rushes in the United States 1830-61, drawing on contemporary accounts and numismatic literature, finds otherwise. While some private gold mints produced underweight coins, from incompetence or fraudulent intent, such mints did not last longer than a few months. Informed by newspapers about the findings of assays, money-users systematically abandoned substandard coins in favor of full-weight coins. Only competent and honest mints survived. JEL Codes: E42 , D83 Keywords: gold standard, coins, mints, gold rush, information asymmetry *The author gratefully acknowledges support from the Mercatus Center at George Mason University and the Eudaemonia Institute of Wake Forest University. Views and errors are his alone. 1 The private mint in economics: Evidence from the American gold rushes Although not as prominent in economics textbooks as the case of the lighthouse scrutinized by Ronald Coase, the precious metallic mint has also played the role, in the writings of some economists, of what Coase (1974, p.