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Should we abolish the penny?
Posted by Tyler Cowen on November 17, 2006 at 07:18 AM in Economics | Permalink
Comments
I think the mere fact that Kevin Federline was an opponent of the movement to get rid of the penny makes it a pretty good idea.
Posted by: nelsonal at Nov 17, 2006 7:45:52 AM
Calls to abolish the penny appear periodically in the press, don't they, usually accompanied with stories about the "popularity" of the Sacajewa (sp?) coin and the resurgence of the two dollar (Jefferson?) bill. I wonder how well the mentions correlate to historical financial indicators, inflation, deflation, stagnation, etc.?
Posted by: rzklkng at Nov 17, 2006 8:20:51 AM
If the penny imposed significant costs on retail chains, wouldn't they engineer their prices to combine with sales tax to produce a result divisible by 5? Or is there a competitive disadvantage in doing so--i.e., are consumers sensitive to < 5 cent differences in price between stores? Is there any evidence this is happening?
Posted by: Sandy Smith at Nov 17, 2006 8:52:45 AM
One argument I've heard against ditching the penny is that retailers will
round up prices. But given that everyone wants their prices to be just under
the nearest dollar mark -- e.g. $7.99 instead of $8 -- wouldn't this be just
as like to push prices down, say to $7.95 in the previous example?
Just a thought.
Posted by: Colin at Nov 17, 2006 9:45:20 AM
Many stores have already given customers the option of eliminating the penny by having "Give/Take a Penny" bowls near the register. At a couple of places I pay with cash, they don't even bother with that: they round up my change to the nearest nickel without even asking.
Posted by: DaveL at Nov 17, 2006 10:27:08 AM
In a way, haven't we already eliminated the penny from most transactions? Nearly all of my money these days are electrons flowing through the ether. About the only time I ever spend cash is when I buy lunch at a fast-food restaurant. Even then, if they have a tip jar, I'll deposit all my change except the quarters. Everywhere else, it's my debit or credit card (whose balance is paid automatically each month).
So in a given month, my total cash expenditures will top out at around $120 (even less when I decide to brown-bag my lunch). As a percentage of even my own meagre income, that's miniscule almost to the point of insignificance.
Posted by: Independent George at Nov 17, 2006 11:10:55 AM
At the farmer's market where I buy most of my produce, prices are generally rounded to the nearest quarter (although some round to the dime).
Posted by: don Hosek at Nov 17, 2006 11:22:14 AM
Personally, I would rather abolish the inflation that made the penny (nearly) valueless in the first place. Alas, I fear the penny will be long gone before my first preference is realized.
Posted by: Christopher Rasch at Nov 17, 2006 12:01:46 PM
Where do the copper and zinc lobbies stand on this?
Posted by: Chris Meisenzahl at Nov 17, 2006 12:35:23 PM
The copper lobby probably doesn't care, or favors this [because a dime may well contain more than ten times as much copper as a penny].
http://www.madsci.org/posts/archives/may2001/988823062.Ch.r.html
-dk
Posted by: Dick King at Nov 17, 2006 1:19:49 PM
"One argument I've heard against ditching the penny is that retailers will
round up prices."
Questions for the economists:
1. Then why don't they round up prices to the fraction of a penny, especially for electronic transactions? Charging an extra 1/4th of a penny would be non-trivial for big retailers.
2. Isn't this arguing that there is no competitive pressure on price setting?
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Posted by: aion kina at Mar 20, 2009 9:52:52 PM
I think the penny should be abolished be cause people have no real use for it because what does it do for us exept give us pocket change and take up room in the piggy bank
Posted by: josh jones at Oct 2, 2009 1:37:16 PM
