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Resource endowments and the problem of small change: insights from two American mints, 1600–1700

Published online by Cambridge University Press:  19 October 2021

Jane E. Knodell  and
Catalina M. Vizcarra
Jane E. Knodell*
Affiliation:
University of Vermont
Catalina M. Vizcarra*
Affiliation:
University of Vermont
*
Jane E. Knodell and Catalina M. Vizcarra, Department of Economics, University of Vermont, 239 Old Mill Building, 94 University Place, BurlingtonVT05405, USA; email: jane.knodell@uvm.edu, catalina.vizcarra@uvm.edu.
Jane E. Knodell and Catalina M. Vizcarra, Department of Economics, University of Vermont, 239 Old Mill Building, 94 University Place, BurlingtonVT05405, USA; email: jane.knodell@uvm.edu, catalina.vizcarra@uvm.edu.
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Abstract

This article discusses historical evidence from the Potosi mint and Massachusetts Bay mint that illustrates the importance of the resource endowment (in this case silver) for the provision of small change. We show that the availability of silver was fundamental in shaping incentives. The relative scarcity of silver in Massachusetts Bay contributed to the small scale of the mint's operations, and implied that neither the monetary authority nor the mintmaster faced a significant tradeoff between drawing seigniorage from the mint and the production of small-denomination coins. In contrast, in the Viceroyalty of Peru, the abundance of silver, and the consequent large level of production of the mint's heavy peso coin, heightened the tradeoff between the fiscal and monetary objectives of the coinage. We suggest that these incentives negatively affected the production of fractionary coinage in the Peruvian viceroyalty, whereas in Massachusetts Bay the production of small-denomination coins was the norm.

Keywords

monetary historyinstitutionscolonial legacy

JEL classification

N26: Latin America • Caribbean N21: U.S. • Canada: Pre-1913
Type
Articles
Information
Financial History Review , Volume 28 , Issue 3 , December 2021 , pp. 344 - 363
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Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of the European Association for Banking and Financial History

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Footnotes

We are particularly indebted to the editors and two anonymous referees for their thoughtful comments. We also want to extend our appreciation to participants at the 2020 American Historical Association meetings, the World Economic History Presidential Session at the 2019 Southern Economic Association conference, the 2019 Congreso Latinoamericano de Historia Económica (CLADHE), the 2019 Business History Conference and the 2018 World Economic History Conference for their insights and encouragement on earlier versions of this article. All errors are our own.

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