Monatea Cudendae Ratio

Nicolaus Copernicus (1473-1543) published his book " De Revolutionibus Orbium Coelestium (On the Revolutions of the Heavenly Spheres)" in 1543, shortly before his death, and made his name known in history as the Copernican Revolution. Until that day, an earth-centered universe model (geocentric model) was imagined, while with Copernicus, the existence of a sun-centered universe (heliocentric model) was revealed. Science is at one of the turning points in its history.

18 centuries before Copernicus, in ancient Greece, an astronomer named Aristarchus (310-230 BC) also proposed the sun-centered universe model. He tried to measure the size of the Sun and Moon with his work titled “ On the Sizes and Distances of the Sun and Moon” . He tried to compare the size of the Sun and Moon with the size of the Earth. However, Aristarchus’ determination was not as scientifically proven as Copernicus’ due to the possibilities of his time. For this reason, this very important determination takes its place in the history of science with Copernicus’ name.

Source: https://www.britannica.com/biography/Nicolaus-Copernicus

Science is a concept, a process that develops with research, measurements, and experiences. It took us thousands of years to even understand that we live in a system where the sun is at the center of the galaxy we are in! Since many of the findings of science could not be transferred to the next generations throughout history, progress was slow at first.

Copernicus, who left his mark on world history with a revolution, also has a close interest in the quantity theory of money. Copernicus is interested in economics and especially money.

The word "revolutionibus" that Copernicus used in astronomy also has great importance and value in terms of economics. Copernicus' works on his ideas about money preceded De Revolutionibus Orbium Coelestium. The meaning of the word that can be used in economics and quantity theory is circulation.

Long before his 1543 astronomy work that revolutionized the history of science, Copernicus wrote an essay called “ De Aestimatione Monetae (On the Value of Coin) ” in 1517. He developed the content of this essay with two works in 1519: “ Tractatus de Monetis (Treatise on Coin) ” and “ Modus Cudendi Monetam (The Way to Strike Coin) ”. The process ended with the writing of “ Monatea Cudendae Ratio (On the Minting of Coin) ” in 1526.

Monatea Cudendae Ratio describes Gresham's Law, which would later be named after Sir Thomas Gresham (1519-1579): bad money drives out good money (debased) .

The principle of bad money driving out good money was discovered before Copernicus. Nicole Oresme (1320-1380) discovered the principle long before Copernicus with her work “De Origine, Natura, Jure et Mutationibus Monetarum (On the Origin, Nature, Law, and Alterations of Money) ”. However, Copernicus was unaware of Oresme’s work. Scientific findings did not reach later generations.

It is possible to come across traces of the principle discovered by Oresme and Copernicus even in Aristophanes' (446-386 BC) play The Frogs .

Copernicus discovered the relationship between the money stock, the velocity of money, the price level and the amount of production. In other words, he discovered the quantity theory of money. He explains the law, which will be named after Gresham, with the difference between the cost of producing money and the value written on it.

The money contains metals such as nickel, copper, and silver. Values such as 1, 5, and 10 are also written on the money. The difference between the value of the metals contained in the money and the value written on the money is called seigniorage.

“Good money” refers to the situation where the value of the metal or mixture of metals contained in the money (commodity value) exceeds the value written on the money (face value). “Bad money” refers to the situation where the value of the metal or mixture of metals contained in the money remains below the value written on the money.

Money has the function of a medium of exchange in the sale of goods and services. The price, which is the subject of this exchange, brings together supply and demand through the value written on the money. When the value of the metal contained in the money exceeds the value written on the money, the society prefers to keep the good money in its pocket. It tries to get rid of the bad money, which is below the value written on the metal contained in the money. Thus, while the good money is withdrawn from circulation, the weight of the bad money in circulation increases. In other words, the bad money drives out the good money. In other words, two currencies with different values cannot remain in circulation at the same time. Those who keep the good money in their pockets also earn “seigniorage income”.

Why is a situation identified by Oresme and Copernicus before Gresham widely referred to by Gresham's name? The reason is that it is seen as an error. The rule is not one that Gresham developed independently of other studies. The person who made the rule Gresham's own in 1858 was the Scottish economist Henry Dunning Macleod (1821-1902). Many views state that Henry Dunning Macleod made a mistake.

Copernicus wrote Monatea Cudendae Ratio at the request of King Sigismund I of Poland. Poland wanted to have a stable currency. In order to reduce the cost of minting money, good and bad money were created by using less valuable metal (debasement). Therefore, good money was being taken out of circulation by bad money. Two currencies with different values could not remain in circulation at the same time for the reasons mentioned above. Copernicus determined this situation and presented his determination to the king who wanted to make a currency reform.

England also had problems with the value of its money. Queen Elizabeth's father, Henry VIII (1491-1547), reduced the amount of silver in money by 40% with a law he passed. Gresham wrote a letter to Queen Elizabeth (1533-1603), who ascended to the throne in 1558, and tried to explain the negative situation of English money. Like Copernicus, Gresham also touched on the same problem. The aim of reducing the production cost of money by reducing the amount of more valuable metal used in money was to provide resources for the budget without increasing taxes. However, this aim led to an unexpected result. In the letter he wrote to the queen, Gresham criticized the law passed by the queen's father. A situation is being experienced in England where bad money is taking good money out of circulation.

The law, which was mistakenly named after Gresham, could also change direction over time. In modern economies, when the national currency is constantly losing value and losing stability, and when there is high dollarization and the use of another national currency as a medium of exchange is prohibited, assets with value in the market are accepted and national currency that has become bad money is avoided. In this case, the tendency to use alternative payment methods in the market (gold, use of national currency by pricing it at the value of foreign currency, etc.) increases. In other words, a situation emerges where good money drives out bad money, which is called Thiers Law. The law takes its name from the French politician Adolphe Thiers (1797-1877), but Adolphe Thiers is not the creator of the law named after him. A study by French economist Peter Bernholz is attributed to Thiers.

History has also told us that increasing circulation of money creates inflation. Civilizations that tried to reduce the production value of money in circulation by using less valuable metals in order to contribute to public finances saw inflation rise and had to deal with social unrest.

Why are theses that have been discussed and proven many times throughout history tried to be proven again at the cost of paying a heavy price? Has it not been understood what kind of negative consequences non-market practices can have, despite hundreds or even thousands of years of experience?

Artificial methods are the choices of those who have no historical or scientific knowledge background. They never give the results they desire. You can put the economy aside, but they don't give political results either.