
Gresham’s Law: Bad Drives Out Good as Time Passes (2009) - dredmorbius
https://fs.blog/2009/12/mental-model-greshams-law/
======
TwoNineFive
In organizations I've known this as the "Dead Sea Effect", where good/talented
employees leave the company because they don't want to work with bad/mediocre
employees, and all you have left is the bad/mediocre.

I've also seen this effect take a form where good employees will recognize
what is happening and rock the boat, trying to make it clear that there's
something wrong and that something should be done about it. Mediocre managers
and employees don't like this and eventually the good employee gets fired. The
lazy and mediocre then run the show; as long as that paycheck keeps coming in,
who cares if we are doing a good job or not?

~~~
networkimprov
No employee is simply talented or mediocre or bad. Everyone you meet has
strengths and weaknesses. Some people's strengths aren't in demand every day,
but crucial when called upon. Others have weaknesses which rarely appear, but
are terribly damaging when they do.

And everyone is drawn to the company of others in the workplace based
primarily on interpersonal factors, not others' ability or performance or lack
thereof.

Certainly, there are toxic personalities which can poison an environment, but
they generally have some valuable assets as well.

Deciding to leave an organization because of its people is never a simple
calculation.

~~~
dredmorbius
How the team is assembled matters. Of heaven and hell:

In heaven, the cooks are French, the lovers are Italian, the mechanics are
German, the police are British, and everything is organised by the Swiss.

In hell, the cooks are British, the lovers are Swiss, the mechanics are
French, the police are German, and everything is organised by the Italians.

~~~
boznz
From the number of cooking programs on my TV with british cooks at the moment
I would assume the british have upped the game a bit on cooking :-)

~~~
dredmorbius
How many are curries or other imports? ;-)

(Says the cat who's been home-baking crumpets.)

------
rkwz
We can adapt the Gresham’s Law for Software Development:

Project [A] is built within "x" months with lot of tech debt, crunch time and
stressed out employees

Project [B] is built within "x+y" months with sane architecture and healthy
working hours

If management doesn't understand the benefits of good architecture and
employee well being, [A] will become the baseline against which all future
projects get measured.

The software system gets messier and messier => resulting in more bugs =>
resulting in working weekends and late nights => employees make poor decisions
because of mental fatigue => resulting in more bugs => ...

~~~
wdutch
I think you're dead right but it goes even deeper. With more bugs the company
starts evaluating devs on their ability to fix bugs and put out fires.
Eventually the devs who can build a sane product are squeezed out and all the
devs are good at is fixing bugs rather than introducing fewer bugs in the
first place.

I noticed this when working as a dev in the finance industry. The devs who put
out the most fires got the biggest bonuses and float to the top so they have a
say in hiring and hire more people like themselves. A textbook case of
Gresham's Law.

~~~
chii
but why does the effect only happen in software engineering, but not physical
engineering?

You don't see buildings that are near collapse and require constant repair and
redesign. You don't see construction contracts awarded to companies that build
poor buildings. In fact, most buildings work fine, and even tho most also have
some defects, those defects tend to be minor and can often be overlooked.

So what makes software engineering different?

~~~
gonzo41
You don't see buildings that are near collapse and require constant repair and
redesign.

When the covid thing is over, have a trip to Sydney Australia. There;s lots of
cheaply done buildings here in all states of disrepair. People cheap out on
the invisible stuff like correct wiring, correct plumbing and correct
foundations.

And in software people cheap out on those same things because they can take
the money and run.

You could fix this by making payment for software as 25% upfront with 20% on
deliver and then 50% on 18 months of as advertised use.

But no one would ever do that. When Azzure or GC or AWS goes down every 5
years or so for a few hours, everyone gets server credits back for teh
interruption and revenue loss. No liability as assumed.

~~~
dmolony
You can add Canberra to that list. I know several apartment blocks that are
close to collapse, one Owners' Corporation is currently suing the builder (and
the local government authority) in a case before the Supreme Court.

------
shoo
related:
[https://en.wikipedia.org/wiki/The_Market_for_Lemons](https://en.wikipedia.org/wiki/The_Market_for_Lemons)

> Suppose buyers cannot distinguish between a high-quality car (a "peach") and
> a "lemon". Then they are only willing to pay a fixed price for a car that
> averages the value of a "peach" and "lemon" together (p_avg). But sellers
> know whether they hold a peach or a lemon. Given the fixed price at which
> buyers will buy, sellers will sell only when they hold "lemons" (since
> p_lemon < p_avg) and they will leave the market when they hold "peaches"
> (since p_peach > p_avg). Eventually, as enough sellers of "peaches" leave
> the market, the average willingness-to-pay of buyers will decrease (since
> the average quality of cars on the market decreased), leading to even more
> sellers of high-quality cars to leave the market through a positive feedback
> loop.

> Thus the uninformed buyer's price creates an adverse selection problem that
> drives the high-quality cars from the market. Adverse selection is a market
> mechanism that can lead to a market collapse.

~~~
chii
> Adverse selection is a market mechanism that can lead to a market collapse.

if an uninformed buyer buys a lemon, and they don't suffer the consequences
(e.g., a lemon works just as well as a peach, 'cept in aesthetics or some
other unimportant metric), then it's not collapsing the market at all. It just
means that peaches, as judged by sellers, aren't as valuable as they think.

It's like the stock market in this sense - buyers of a stock doesn't "really"
know if the stock is a lemon or a peach. Neither does the original owner of
the stock of course.

~~~
ptx
It could be that the buyer doesn't suffer the consequences until much later,
or that they are suffered only in aggregate by buyers.

For example: cheap smoke detector that doesn't detect smoke, cheap food full
of lead contamination, cheap software full of buffer overflow vulnerabilities.

------
dnprock
Gresham's Law is frequently misunderstood. It's not accurate to say that "bad"
drives out "good" in a literal sense. It's more like "less desirable" driving
"more desirable" out of circulation. The "more desirable" is highly valued,
not competed out of existence. It's just not in circulation.

In the case of coinage, gold coins are not in circulation. But they are still
more valuable than other types of coins. A monetary system usually consists of
both "less desirable" money (e.g. paper money) and "more desirable" money
(e.g. gold, Bitcoin). I explain the law in the context of Bitcoin and fiat in
this article:

[https://bitflate.org/post/2019/11/24/bitcoin-will-not-be-
a-m...](https://bitflate.org/post/2019/11/24/bitcoin-will-not-be-a-medium-of-
exchange.html)

If we have a system where "bad" drives "good" out of existence (not
circulation), then the system will surely have problems.

~~~
phoe-krk
In other words: Gresham's law doesn't make the "good" disappear altogether. It
makes the "good" hoarded and kept instead of passed around, which prevents the
"good" from being exchanged between people - or, in other words, removes it
from circulation.

~~~
TeMPOraL
This situation is just a special case, in which it's possible for the "good"
thing to survive without being actively circulated. It may work for "gold as a
store of value", because gold's value is based on scarcity and tradition. It
doesn't work for other things. Gresham's law does boil to natural selection:
if you iterate a system that selectively prefers one thing over the other, the
preferred thing will survive. The preferred thing is usually one that's
cheaper in some sense - monetary, energetically, or ethically.

(WRT. bitcoin, I don't think it's a case of "bad" fiat "driving out good"
bitcoin, but more of bad bitcoin failing to compete with better fiat.)

------
xefer
I believe there is a reference to this law in the movie “No Country for Old
Men”.

The movie was set in 1980. In the famous coin toss scene Anton Chigurh
explicitly states that the date on the quarter is 1958 and that it had been
traveling for 22 years. That means it was a silver coin. The US Coin Act of
1965 changed the make up of coins from 90% silver to cladded nickel and zinc.
The old silver coins very quickly disappeared from circulation. Any remaining
ones were snatched up especially when the price of silver skyrocketed when the
Hunt Brothers in Texas tried to corner the silver market in 1980, right in the
time period when the movie was set.

So basically Chigurh had no business having a 1958 silver quarter in his
pocket.

I think Cormac McCarthy was implicitly showing Chigurh was a dispassionate
force of evil driving out the good.

~~~
nickthemagicman
Ive interpreted Chigurh as an agent of chaos much like the Joker. We've given
our lives all this order and civilization but underneath is ultimately chaos.

------
visarga
Same principle drives the amplification of inequality in society. People and
companies try to protect their incomes so they lobby or game the system,
competing against each other to gain the upper hand. As a consequence they
directly harm the common good, which would be a thriving economy. It's a
gradual process of accumulation of inflexibility which can become its own
downfall.

~~~
umvi
Let's not forget the opposite extreme though (USSR). If you try to regulate
inequality away by redesigning your entire government, what ends up happening
is that everyone is equally poor except the elite corrupt government officials

~~~
luckylion
You're also creating a shadow market. A good friend of my grandmother lived in
East Germany during the cold war and explained the German term "Bückware"
(literally _bend-down wares_ ) to me: the sought-after goods in stores that
you'd only get by trading favors, stored out of sight under the counter so
they'd have to bend down to get it.

~~~
heavenlyblue
It was also called _blat_ in Eastern Europe [1].

[1]
[https://en.wikipedia.org/wiki/Blat_(favors)](https://en.wikipedia.org/wiki/Blat_\(favors\))

------
smitty1e
Is this the whole story, though?

The truly wretched coins, and the governments that issue them, tend to exit
circulation, too.

Perhaps Gresham's Law has some relationship to regression toward the mean
=>[https://en.m.wikipedia.org/wiki/Regression_toward_the_mean](https://en.m.wikipedia.org/wiki/Regression_toward_the_mean)

~~~
TwoNineFive
In line with this, I sometimes feel that the best way to fix a problem is to
make it worse, to the point where it's intolerable.

Kind of like a pot-hole in the street out in front of your house. If it's a
small pot-hole it might go unnoticed and unfixed, but if you go take a pick-
axe to it to the point where cars start bottoming out, it's more likely to get
fixed.

Almost like the squeaky wheel gets the grease.

I recently witnessed someone take this strategy to task on Reddit where the
Ubiquiti subreddit had become inundated with low-quality picture posts.

[https://reddit.com/r/Ubiquiti/comments/fa1wdw/please_post_mo...](https://reddit.com/r/Ubiquiti/comments/fa1wdw/please_post_more_pictures_of_boxes_the_only_way/)

~~~
saagarjha
Ever seen /r/ProgrammerHumor? It used to be great, until it started being
featured on /r/all, and the low quality “bad UI” and “I can’t find my
semicolon” posts started flowing in and being upvoted. Now it’s awful. There
was one great post yesterday and it was glorious
([https://old.reddit.com/r/ProgrammerHumor/comments/g4cr9m/my_...](https://old.reddit.com/r/ProgrammerHumor/comments/g4cr9m/my_i3_is_working_hard))
but it’s back to usual now :(

~~~
lstamour
I dunno, I got a kick out of
[https://www.reddit.com/r/ProgrammerHumor/comments/g50h6m/a_s...](https://www.reddit.com/r/ProgrammerHumor/comments/g50h6m/a_small_but_sweet_victory/)

------
thaumaturgy
Another popular essay on this subject is "Well-Kept Gardens Die By Pacifism",
[https://www.lesswrong.com/posts/tscc3e5eujrsEeFN4/well-
kept-...](https://www.lesswrong.com/posts/tscc3e5eujrsEeFN4/well-kept-gardens-
die-by-pacifism)

~~~
dredmorbius
Very nice, thanks.

Shades of Bumblebee Labs' "The Evaporative Cooling Effect":
[https://web.archive.org/web/20101012105003/blog.bumblebeelab...](https://web.archive.org/web/20101012105003/blog.bumblebeelabs.com/social-
software-sundays-2-the-evaporative-cooling-effect/)

------
zomglings
Thank you, that was a great read. Did not know about Gresham's Law.

I wish the author would have included some examples in which Gresham's Law is
violated. It seems related to "Thiers' Law" (which is described on the
Gresham's Law Wikipedia page [0]).

It also seems as if Gresham's Law contains a statement of the dynamics that
drive good coins out of circulation that make it a very special kind of race
to the bottom. For example, in the excerpt from the Mackenzie King letter, the
application to industrial standards seems to reflect a somewhat different
dynamic.

0
[https://en.wikipedia.org/wiki/Gresham%27s_law#Reverse_of_Gre...](https://en.wikipedia.org/wiki/Gresham%27s_law#Reverse_of_Gresham's_law_\(Thiers'_law\))

~~~
invalidOrTaken
Gresham's Law tends to no longer hold when the difference between good and bad
is _qualitative_ rather than quantitative, and when there are more than one
degree of separation between the two.

Joe's Websearch can be cheaper than Google but is _much_ crappier, parasitic
mobile games are profitable but doomed to mayfly longevity, etc.

~~~
ucarion
I'm not sure that's true. The more Florence debases the silver florin while
Venice stays honest, the more I'm tempted to melt my old florins into Venetian
silver ducats. I only get a better and better deal that way.

~~~
invalidOrTaken
Sure, but when you take a _real_ qualitative jump---melting down silver coins
for use in photography or photovoltaics---quality matters again.

------
prmph
It's interesting, I've noted that bad products tend to drive out good
products. This happens with all sorts of products: food, software, etc. A lot
of the time, the products are even from the same company: they come out with a
good product, the market laps it up; and then begins a process of degradation
as they make the product worse for no discernible reason.

Case in point, I can't count how many times I've been to a grocery shop
looking for a packaged food product I've come to really like, only to find
that it is no longer stocked, or that it has been replaced by an objectively
inferior product. This seems to rarely happen with mediocre items

~~~
RobertoG
>>"[..] as they make the product worse for no discernible reason."

Well, they don't make the product worst on purpose, they make it cheaper to
produce, in the hope that people keep buying it at the same price.

The metric to optimize is not "quality of product" but "profit".

Basic capitalism.

------
zaptheimpaler
Cool i didn't know this had a name. In a way, its obvious once you are
sufficiently cynical - in any system or long-term game, the most common
strategy will be the one that wins often. From an evolutionary standpoint an
advantage is an advantage, morality has nothing to do with it. The reason
morality does matter is that over a long enough time frame, bad behavior
becomes clear, good behavior breeds trust but that requires you play a long
enough game with a stable set of people.

~~~
TeMPOraL
It has many names. "Natural selection" and "free market competition" are
others. It's the same mechanism.

> _The reason morality does matter is that over a long enough time frame, bad
> behavior becomes clear, good behavior breeds trust but that requires you
> play a long enough game with a stable set of people._

This is an exception rather than a rule, which is why you see little morality
in nature, why it's a struggle to keep people behaving, and why it gets harder
as societies become larger and more subdivided into specializations and
abstraction layers.

------
nednar
While it is a competitive advantage inside the system (team, company, country,
political system), it decreases the competitiveness of the system as a whole
in relation to other systems. For instance the more a company is like this the
less actually valuable results it can show (since there is less and less to
steal from actual value producers), the more it needs to spend its resources
on also fighting off external competitors like other companies who still
create results, managing bad press, and stopping customers from leaving to
better providers.

It's very much like a parasite-host relationship. Sure in the 1:1 relationship
the parasite might keep the upper hand and live longer, but in the end both
are dying to make place for another organism.

For the world as a whole it's also not a bad thing. The world changes and new
problems need new systems to deal with. But the new systems cannot prosper if
old systems are efficient enough to defend their place.

------
seph-reed
This is one of those problems that seems to require a centralized and somehow
morally superior source of decision making. Which is to say: it's the anti-
thesis of decentralization or equality; the benevolent dictator so to speak.

~~~
btrask
You're right, and it's too bad you were downvoted.

------
Mirioron
> _Forms of human behavior survive because they have a competitive edge
> against other behaviors. Self-interested groups naturally tend towards what
> works, so bad drives out good (in a moral sense) if it causes superior
> practical effects. This is one large reason why forms of regulation and
> policing are needed in human systems, to prevent the Law from working its
> magic._

I don't think that a requirement for regulation and policing follows from
that. Regulation and policing can also be caught by these bad practices.
Regulatory capture is an example of that.

In my opinion, this suggests instead that we need irregular resets to the
system. Wipe the slate clean and start building it up again. That does come
with enormous cost, but it seems to me like it's the only way to truly stand
against constant degradation without finding a way to counter the degradation.

~~~
itronitron
I think mandatory attendance in grade school is a regulation that is
interesting to consider in the context of Gresham's law.

Is attendance mandatory so that the disruptive (bad) students don't drive out
the good ones from attending, or does mandatory attendance create a situation
that favors the bad student (by forcing them to attend) at an expense to the
good student, who would have attended otherwise?

~~~
TeMPOraL
Attendence is mandatory so that "bad" parents - bad usually because of
circumstances, not ill will - do not pull their kids from schools and have
them work or help around the house, reaping short-term benefits at the expense
of their children's futures.

------
Giorgi
Nice read, very revealing and eye-opening to me personally. I think this law
applies to jobs too. If your superior never calls-out lying narcissistic
behavior, and you do not posses such "skills" you will be driven out.

And avoid industries where customer do not care if final product is made from
crap or gold.

------
aaron695
"In fact, one might call Gresham’s Law something of a special case of natural
selection itself.

Forms of human behavior survive because they have a competitive edge against
other behaviors. Self-interested groups naturally tend towards what works, so
bad drives out good (in a moral sense) if it causes superior practical
effects."

Except we have morals. So no this is a really poor example.

If anything our morals are what's holding up back. a 100,000 year old concept
that works well in a village where you live day by day but has little use in
the modern world where we can use numbers to tell us the best course of
action.

~~~
dredmorbius
My view is that Gresham's Law often serves as a complexity constraint within a
selection. process.

Given two (or more) means to some end, the mean with the fewest constraints,
lowest cost, or least complexity, all else equal, tends to succeed.

Interesting case is where least constraints, costs, and complexity are
distributed among several alternatives.

------
save_ferris
I’ve felt for a long time that the political system works this way as well.
Speaking strictly from a non-partisan standpoint, there’s a strong case to be
made that this perception exists widely in American society.

It’s why Trump’s “drain the swamp” messaging worked so well in 2016, it’s why
things like gerrymandering exist, and it’s why we continue to see record
amounts of money, much of it of unknown origin, proliferate and direct
political discourse and messaging.

~~~
dredmorbius
You and Aristophanes, in _The Frogs_ , 405 BCE, as noted and cited in the
article.

There's also H.L. Mencken's "Brayard vs. Lionheart", 1920 CE:

 _[W]hen a candidate for public office faces the voters he does not face men
of sense; he faces a mob of men whose chief distinguishing mark is the fact
that they are quite incapable of weighing ideas, or even of comprehending any
save the most elemental—men whose whole thinking is done in terms of emotion,
and whose dominant emotion is dread of what they cannot understand. So
confronted, the candidate must either bark with the pack, or count himself
lost. His one aim is to disarm suspicion, to arouse confidence in his
orthodoxy, to avoid challenge. If he is a man of convictions, of enthusiasm,
of self-respect, it is cruelly hard._

[http://amomai.blogspot.com/2008/10/hl-mencken-bayard-vs-
lion...](http://amomai.blogspot.com/2008/10/hl-mencken-bayard-vs-
lionheart.html)

Other writers have drawn from Jean Piaget's models of intellectual
development, and the distribution of such capabilities in the general
population.

I strongly recommend reading the full piece. Several times.

------
GarrisonPrime
This seems like an attempt to justify iron-fist regulation. “For our own
good”, of course.

It seems like a fallacy, this law. The bad is only able to survive at the
expense of the system. Meanwhile, the good that was driven out is busy making
its own new system.

~~~
dredmorbius
There's a pretty fascinating list of results in Google Books for "a Gresham's
Law of" or "a sort of Gresham's Law", dating to the 19th century, suggesting
at the very least an ideologically broad, if not agnostic, application of the
concept:

[https://www.google.com/search?tbm=bks&ei=RGSeXuWpJozdtAa876-...](https://www.google.com/search?tbm=bks&ei=RGSeXuWpJozdtAa876-ICA&q=%28"a+Gresham%27s+Law+of"%7C"a+sort+of+Gresham%27s+Law"%29&oq=%28"a+Gresham%27s+Law+of"%7C"a+sort+of+Gresham%27s+Law"%29)

------
mplanchard
One of my favorite essays on this topic is “Meditations on Moloch”[0]. Does a
great job of introducing the topic and pricing a lot of compelling examples,
all while tying it in to Alan Ginsberg’s famous poem.

[0]: [https://slatestarcodex.com/2014/07/30/meditations-on-
moloch/](https://slatestarcodex.com/2014/07/30/meditations-on-moloch/)

------
Anonymous4C54D6
Meh. If you have two coins that are nominally worth the same but one is
actually worth more - because it can, in a pinch, be melted down for a
valuable resource - I wouldn't call this the bad driving out the good.

Of course the point that bad behavior may give a higher fitness score is still
true.

I also like the idea of lemon market's in this context:
[https://en.wikipedia.org/wiki/The_Market_for_Lemons](https://en.wikipedia.org/wiki/The_Market_for_Lemons)
In short and very simplified: if the customer cannot tell the good products
from the bad products he will not pay the price of the good products and so
the good products disappear.

------
Nihilartikel
Great read..

I had always attributed the observation to Mel Books :P

"So, Lone Starr, now you see that evil will always triumph, because good is
dumb." — Dark Helmet, Spaceballs.

------
masayune
Maybe I’m a bit too pessimistic, but are there any examples where “good money
drives out the bad”? I can’t think of a single industry... maybe cars?

~~~
itronitron
Cars seems like a good example because the quality manifests itself physically
and is independent of how well an individual buyer perceives quality. Also,
the buyer is directly responsible for long-term costs associated with their
decision which isn't the case in currency exchange.

~~~
baq
you mustn't be talking about used cars which are perfect example of
[https://en.wikipedia.org/wiki/The_Market_for_Lemons](https://en.wikipedia.org/wiki/The_Market_for_Lemons)
where if it is impossible to tell what quality a particular good has the price
goes down to the lowest common denominator so to say.

------
ARandomerDude
Of course, in Gresham's day this was called "depravity," a consequence of
Original Sin.

------
alexmingoia
Can someone explain how they got a two-letter blog TLD? I thought they were
reserved.

------
quantified
Board-level executive compensation committees? Discuss.

~~~
dredmorbius
In what way?

If you're referring to executive compensation, game theory seems to offer
clearer understanding.

~~~
quantified
Good point. Game theory requires some understood rules and a set of
participants, as do any market. Game theory provides a good explanation of the
current state given the rules of the game and its participants. The rules
could easily be different if participants behaved differently.

Executive comp levels go against the needs of shareholders, who would
otherwise benefit from the money being invested in the company or distributed
back to themselves.

Game theory can provide insights as to how Gresham’s Law’s effects might play
out, and how sticky the stasis will be in any market that has only bad
currency.

------
narcindin
fs is great. I just finished listening to

Episode 72: Happy Habits with Neil Pasricha

Much recommended

------
dancemethis
That explains Discord.

------
generalpass
Selection bias.

~~~
dredmorbius
Care to expand?

------
quattrofan
Trump administration in a nutshell

