You may have a jar of them on a bedroom dresser or in a car cup-holder. You may occasionally use them triumphantly to pay in exact change. But today, pennies are simply destined to end up in a CoinStar machine.
CoinStar counts your pennies, taking 10 percent of their value, but gives back more convenient cash or larger coins — and sometimes, unluckily, a few remaining pennies for you to try to get rid of again in a few months.
The bottom line is that pennies are hard to use and cost more to make than they are worth. Have people finally had enough of the penny?
Alex Tabbarok from the popular economics blog Marginal Revolution and Harvard economist Greg Mankiw have. They recently shared a video arguing for the abolition of the penny.
Mankiw has long argued this. In a New Year's resolution-styled Wall Street Journal article he says that, "this year I will vote to eliminate the penny. The purpose of the monetary system is to facilitate exchange, but I have to acknowledge that the penny no longer serves that purpose."
The penny debate is nothing new. There is even a K Street organization, "Americans for Common Cents," whose mission is to "inform and educate policymakers, consumers, and the media about the penny's economic, cultural and historical significance." In 2006 when the cost to make a penny exceeded 1 cent, the option of abolishing the penny was again raised.
With recent focus on cutting any government waste, some think cutting the penny could be a small start. The following is a breakdown of the pros and cons of abolishing the penny.
Arguments for scrapping the penny:
It costs more to make than it is worth. Because of the the increase in copper and the decrease in value of the penny due to inflation, the U.S. Mint has resorted to making a penny out of 95 percent zinc and 5 percent copper. And even then, it costs around 1.8 cents to make every penny.
Hard to use. The penny does not buy what it once did. Other than CoinStar, machines do not take them. Trying to use pennies to purchase something of reasonable price is so disorderly you could be arrested.
Arguments for keeping the penny:
Presidential respect — Lincoln is greatly admired in the U.S. and it might seem disrespectful to melt his face off a large number of coinage — although Lincoln would still have the $5 bill.
Prices will increase — prices will increase as a result of rounding to the nearest 5 cents, but not necessarily for the long run. Inflation would soon take care of the 5-cent maximum jump so that in the end the price increase would be a wash. New Zealand and Australia did away with their pennies and saw no long-term price increases.
Decrease in charitable contributions — there was no evidence of decreased charitable contributions in New Zealand and Australia. And it is hard to believe Americans would not give a nickel when they would have given a few pennies.