On This PageOctober 2002, No. 182

Solving the Problem of Small Change
Last Updated: 09/19/02

In the last hundred years, monetary systems have evolved from commodity based, meaning their value is tied to a commodity like gold, to fiat based, meaning their value is not tied to anything. Why did this happen? What was wrong with the old commodity-based systems? A recent book explores these historical developments and shows how the problem of small change played a crucial role in the introduction of fiat money.