The economics of small change: resolving coinage challenges in medieval Europe

In medieval Europe's coinage systems, introducing small-denomination coins was a significant challenge due to their higher relative production costs, often leading to shortages. To address this issue, economic theory suggests a standard formula: mint small coins as overvalued credit money on the government's account and convert them on demand at a pegged rate. This article explores the alternative methods adopted during different periods to mitigate this issue. In the early and high Middle Ages, mints employed a simple yet effective strategy: dividing larger coins into smaller units, bypassing the cost barrier. Our analysis of coin hoards from this era confirms the success of this method in preventing small change scarcity. Central and northern European minting authorities innovated with unifaced ‘hohlpfennigs’ in the late Middle Ages, utilizing cost-efficient technology. Our analysis demonstrates the absence of hohlpfennig shortages. It elucidates the economic and technological factors influencing this minting method and its eventual decline by the early sixteenth century. These historical insights underscore that small change production was primarily a supply-side challenge, offering valuable lessons for modern economic systems.

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Publication Details

Journal
Financial History Review
Published
2024-12-01
DOI
https://doi.org/10.1017/s096856502400012x
Primary Topic
Historical Economic and Social Studies
Type
article
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article

The economics of small change: resolving coinage challenges in medieval Europe

Andreas Westermark, Roger Svensson
Financial History Review
Historical Economic and Social Studies
article

The economics of small change: resolving coinage challenges in medieval Europe

Andreas Westermark, Roger Svensson
article en

Abstract

In medieval Europe's coinage systems, introducing small-denomination coins was a significant challenge due to their higher relative production costs, often leading to shortages. To address this issue, economic theory suggests a standard formula: mint small coins as overvalued credit money on the government's account and convert them on demand at a pegged rate. This article explores the alternative methods adopted during different periods to mitigate this issue. In the early and high Middle Ages, mints employed a simple yet effective strategy: dividing larger coins into smaller units, bypassing the cost barrier. Our analysis of coin hoards from this era confirms the success of this method in preventing small change scarcity. Central and northern European minting authorities innovated with unifaced ‘hohlpfennigs’ in the late Middle Ages, utilizing cost-efficient technology. Our analysis demonstrates the absence of hohlpfennig shortages. It elucidates the economic and technological factors influencing this minting method and its eventual decline by the early sixteenth century. These historical insights underscore that small change production was primarily a supply-side challenge, offering valuable lessons for modern economic systems.

Financial History ReviewVol. 31(3)
Swedish National Bank (SE), Research Institute of Industrial Economics (SE)
Openalex Percentile: Top 69%
Historical Economic and Social Studies
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