Gresham's Law

How does e-mail relate to economics? Well, I've got one example. I can tell you how e-mail illustrates an economic principle known as Gresham's Law. Gresham's Law says that bad currency drives out good currency. Bad and good? What we mean by bad and good in this sense is good currency is something like gold or silver, something that's based on a metal or some other product that isn't likely to lose its value. A bad currency in this sense would be either paper money which could float or say a gold coin that someone has actually knocked some of the weight out of, so it's not as pure as a regular gold coin. And Gresham's Law says that as more and more of this bad currency enters the system, what happens is, people take their gold, you know, they take their gold coins and they don't use them. They're sitting there in their pocket and they've got a gold coin or maybe a silver coin or a piece of paper to buy something, they end up using the bad currency because they want to hold on to that gold coin because it's worth more. It's going to hold its value better.

So what does this have to do with e-mail? Well, let's say we're not talking about gold here and let's say instead of bad currency, what we're talking about is spam. In that case, as the amount of spam has risen, then what tends to happen at least in my case and I think in yours too, is that I don't send as much real e-mail anymore and people who work with me don't send as much e-mail because we're just tired of having to sort through all this. We're overwhelmed, and so we're not sending as big a percentage of e-mail as we used to. So what's happening with all these messages? Well, in my opinion, what's happening is that it's going over to IM. It's going over to text-based messages. So as it starts to decline in e-mail, I find myself now using IM a lot more than I did a year ago, and my son has got a cellular phone, he's using his text messaging a lot more than I do and certainly a lot more than he did a year ago. Anyhow, he never uses his e-mail account anymore.

I suspect though that if con artists and spammers find a way to, you know, spam IM and text messaging as successfully as they had e-mail, we'll see the same Gresham's curve work over here, the same as Gresham's Law and we'll have to go somewhere else for other kind of communications. But I think it's a pretty good example of how Gresham's Law applies to technology as well as to money.