1 of 3
|
|
On February 12, 2009, the 200th anniversary of Abraham Lincoln's birth, an irreverent group of protestors in Concord, Massachusetts launched a protest against the lowly penny. With hopes of sparking a nationwide movement, numerous retailers announced plans to stop handling pennies. In the birthplace of American civil disobedience, demonstrators flung the copper-coated nuisance into the streets.
At the heart of this penny-anti protest is the realization that the value of our smallest monetary unit is simply too low. It costs the U.S. government more than one cent to produce and distribute this coin. Worse yet, according to a recent study, using a penny adds about two seconds to a retail transaction—while the average American wage is slightly more than a cent per two seconds. Thus, even if pennies could be created out of thin air they would still be a losing proposition. Reassuringly, recent research concludes that rounding purchase totals to the nearest nickel would harm neither buyers nor sellers. Most retailers feel compelled to continue using pennies, but when Americans receive them as change, we tend to stash them in piggy banks, sock drawers, and other hoarding places. Because we siphon them out of circulation, retailers ask banks for replacements and the government obliges by minting up several billion more every year—as the vicious cycle continues. The Mint doesn't seem to care (or even notice) that it is at the center of this dysfunctional vortex. Curtailing penny production would require layoffs and dislocations at the Mint, so this cozy, lazy monopolist has little incentive to push for a more efficient, penny-free world.
Americans are burdened with too much small change. Two centuries ago, Britain faced the opposite problem. The Royal Mint, another cozy, lazy monopolist, neglected the interests of the British populace, causing shortages of low-denomination coins. As George Selgin (Department of Economics, West Virginia University) explains in this carefully researched book, commercial firms eventually came to the rescue—supplying high quality coins and igniting a competitive fire to the feet of the Royal Mint—before they were chased out of business by a jealous, skeptical government.
Selgin begins with a clear explanation of the coinage options facing any society and then examines British practice in the late 1700s. Britain had a pseudo-trimetal standard. Its larger-denomination coins were made of gold and silver, but the Royal Mint generally disdained small-denomination coins such as pennies, half-pennies, and farthings. The Mint was paid on commission based on the value of the money struck, so minting small change didn't pay well and was only done in fits and starts. Moreover, these copper coins weren't really legal tender and were refused for tax payments. Yet, there was a huge public demand for them because the average workingman's pay was roughly a penny or less per hour, and many goods purchased by workers and their families cost a few cents or less.
Inevitably, as a result of considerable demand in the face of a piddling supply, frequent shortages of copper coins arose. When payday rolled around, many employers—especially manufacturers and mining concerns—were hard pressed to amass the small coins they desired to pay their workers. Some sent agents riding from place to place in search of small change. Others burdened employees with large-valued coins. (Imagine being paid in twenty or fifty dollar bills today and being unable find ones, fives, and tens when you wanted to buy a sack of flour or a couple of pints.) Some tried payment in kind or ran company stores. Others staggered pay, so that the coins of workers paid in the morning were collected from retailers and paid out to another group of workers in the afternoon. Amid these make-do efforts, the quality of the Royal Mint's copper coins deteriorated after years of circulation. This provided an opening for counterfeiters, who could profit by producing underweight coins that bore a passable likeness to the Mint's product. Contemporary estimates and evidence from a coin hoard unearthed years later suggest that by 1750, almost half of all copper coins were counterfeits, rising above 80 percent toward the end of the century. The Royal Mint did such a poor job supplying small change that people eagerly accepted obvious counterfeits, and Selgin concludes this counterfeiting was a "victimless … largely beneficial" non-crime.
share this page
RSS Feed
