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Abstract

An important development in Europe was the emergence of nationally circulating commodity money. Asymmetric information between coin producers and users provided rulers with an opportunity to supply a public good: standard universally accepted coins. We describe the development of a sophisticated monetary system (bureaucracy) in medieval France. In the monitoring scheme employed by the crown, fines were levied against private mint masters when coins did not meet the standards. Yet, fineness or quality of the coin was measured in a way favorable to the mint master. We show that this method implicitly encouraged the mint masters to produce low-quality coins in such a way that the crown earned rents, and we measure these rents.

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