Saturday, June 03, 2006

Penny Anti

In the June 2006 issue of the American Spectator, John Fund makes the case for getting rid of the penny. An excerpt:

Pennies are a nuisance that is proliferating. This year, the Mint will churn out nine billion of them. That exceeds twice the annual output of all other coins combined. Production is up in part because of hoarding, in part because more and more people are throwing them in jars or drawers and never taking them out again. Few people now bother to pick up a penny when they see it on the street. It's simply not worth the effort. More and more litter on our streets now consists of pennies.

A growing number of experts are concluding the penny is too picayune to bother with. "The purpose of the monetary system is to facilitate exchange, but the penny no longer serves that purpose," says Harvard professor Gregory Mankiw, a former chairman of President Bush's Council of Economic Advisers. "When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful."

When the half-cent was abolished in 1857 it was worth more than eight cents in today's currency. People afterward had no problem living and conducting business, even though the new smallest unit of currency -- the penny -- was worth more than our dime is today. No major problems with transactions were reported at a time that predated the many cashless means of electronic transaction we enjoy today and which, even after penny abolition, can preserve prices to the exact cent if people so choose. (emphasis added)

This is not some conspiracy of right-wingers like Fund and Mankiw. Alan Blinder, Princeton professor and Clinton economic adviser, made essentially the same argument in his Businessweek column back in January 1987.