The History and Economics of Safe Assets

Posted: 14 Aug 2017

See all articles by Gary B. Gorton

Gary B. Gorton

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

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Date Written: August 2017


Safe assets play a critical role in an(y) economy. A safe asset is an asset that is (almost always) valued at face value without expensive and prolonged analysis. By design, there is no benefit to producing (private) information about its value, and this is common knowledge. Consequently, agents need not fear adverse selection when buying or selling safe assets. Safe assets can be easily used to exchange for goods or services or for another asset. These short-term safe assets can be money or money-like. A long-term safe asset can store value over time or be used as collateral. Much of human history can be written in terms of the search for and production of safe assets. But the most prevalent, privately produced short-term safe assets, bank debts, are subject to runs, and this has important implications for macroeconomics and for monetary policy.

Suggested Citation

Gorton, Gary B., The History and Economics of Safe Assets (August 2017). Annual Review of Economics, Vol. 9, pp. 547-586, 2017, Available at SSRN: or

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