The Evolutionary Extinction of the Penny
When I first wrote about getting rid of the penny (one-cent coin) nearly twenty years ago, one of the points I emphasized was that no matter what policy makers decide, no matter how emotionally attached some people might be to the penny, eventually with continued inflation, people will just stop using the coin. The transaction costs of using it will outweigh whatever benefits there are.
It looks as if we in North America are slowly moving in this direction [with thanks to Jack and CT]:
I have posted extensively about pennies in the past. For a list of some of the postings, see this.
It looks as if we in North America are slowly moving in this direction [with thanks to Jack and CT]:
A recent survey conducted by Desjardins Financial Group shows only 37 percent of Canadians still pay with pennies and the organization is suggesting we ditch the one-cent coins, following in the footsteps of countries like Australia and New Zealand.Please, no arguments that getting rid of the penny will lead to higher prices:
There are few things, if any at all, you can purchase with a single Canadian cent. Long gone are the days of penny candy, penny matchbooks and penny arcades. A one-cent stamp even costs more because of the tax.
The coinage also costs more to produce than it's actually worth. Desjardins estimates that producing pennies and keeping them in circulation costs Canadians an estimated $130 million per year. [EE: for more details, see this.]
There are about 20 billion one-cent pieces in circulation yet the Canadian government continues to issue about 820 million a year to replace the ones tossed in fountains and thrown out.
- It hasn't in New Zealand and Australia, both of which got rid of their one-cent and two-cent coins long ago. And here is why:
- Competition will keep merchants all from rounding up automatically. And even if all merchants could round the purchases up,
- I quite frankly don't care if the final tally is always rounded up — I'd just as soon not get the pennies and would be just as happy if the merchants kept them.
I have posted extensively about pennies in the past. For a list of some of the postings, see this.
Category: Economics, Pennies Posted on
Thursday, February 22, 2007 at 11:40pm
<< main
I have finally switched over to debit (check) cards for non-credit purchases, and only use coins for washing machines, parking meters and library fines. I think I only use bills for gas, haircuts and doctor visit co-pays.
I have semi-seriously suggested that all retail use of coins for change be eliminated by the following mechanism :
The only change ever given is a one dollar bill. If the indicated change is p (.01 to .99), then an electronic or other random number generator takes p as an input and generates a 1 (yes, give a $1 bill in change) with a probability of p.
Regards, Don
I suggest a rapid way to reduce the circulation of pennies might be to start making those commemorative coins, the way they've done with state quarters and Jefferson nickels, recently. If they started putting, for example, an image of the driving of the Golden Spike in the Union Pacific, the Emancipation Proclamation, and so on, on the back of each penny, they could see the number of pennies remaining in circulation virtually vanish, due to irrational collectors hoarding them. They could market them as "the last round of Lincoln pennies to be minted!" -- guaranteed to clean out the copper barrels.
Still, I'd prefer that they rework the entire mint to keep the most-commonly-used coins depicting Lincoln and Washington, and ditch Jefferson and Kennedy. But that's just my personal bias.