Getting rid of the penny: A case for change

Not only is getting rid of the penny overdue, but we shouldn’t stop there, but instead remove more coins from circulation.

When I was a kid, my brother and I received as gifts these folios called “Lincoln Cents”. They contained placeholders where you could push pennies in to the book, one slot for each year and version of the penny made (S for San Francisco Mint, D for Denver Mint, etc.).

I gamely tried to collect the whole set, but eventually faltered as other interests took precedence.

In my adulthood, the 50 State Quarters program held my interest in a similar way, and I collected a few of each of those, getting close to the whole set, but not exactly.

Why did I stop collecting? Simple: it’s because I stopped needing, using, or receiving change.

My use of cash has declined precipitously over the past few years. (I learned a lot paying for everything in cash for a month, but I’m not sure I’d recommend that to anyone today, except in very limited circumstances.) Certainly the pandemic had a lot to do with that, but also it accelerated a trend that has been mirrored in our wider society, which is that people just use cards to pay for everything. No checks. No cash. And certainly no change.

And now, with reports that the U.S. Mint is ceasing production of the one cent coin (the penny), I thought I’d take a moment to think critically about those coins that we used to keep in our pocket, and then in our drawer, and now—most likely—don’t keep at all.

Why did the penny get eliminated?

Our current president decreed that minting the penny was wasteful and that it should stop immediately. The U.S. Mint complied, and opted to stop minting any more pennies.

And that was that. It was quite simple, actually.

For all the horrifying things Trump has done as president—flouting the rule of law, virulent corruption, human rights violations, promoting sheer incompetence in positions of power, I could go on—I actually am in favor of this.

Reasons for and against eliminating the penny

The reasons for eliminating the penny have been well known for many years, but in case you’re not as numismatically inclined as I am, here are the reasons:

1. It costs many times more to create a penny than it is worth
2. A penny can buy effectively nothing today, and so is functionally worthless
3. Given the administrative costs in dealing with pennies, such as shipping them, it’s a net negative in value
4. Cash transactions are at all-time low, and usage is trending downward anyway

The reasons against eliminating the penny have always been:

1. Inertia/sentimentality
2. Illinois/Lincoln fans not wanting to lose the depiction of their famous president on the coin
3. The one company that makes (or rather, made) the penny blanks for the government, having an outsized lobbying influence on Congress
4. Poor people use cash
5. The fear that it would somehow increase prices (by rounding up)

However, the reasons against can be shot down easily:

1. Doing something because “we’ve always done it” is a terrible reason to keep doing something. (See also: Slavery.)
2. Lincoln is still on the $5 bill. No one is going to forget about Abraham Lincoln any time soon.
3. Keeping a government production going solely to serve the business interests of a private company is the definition of a bad idea.
4. The underbanked is a real problem, but almost no one, poor or otherwise, is paying for any purchases with an outsized number of pennies, and they can easily be replaced with nickels.
5. This is a misunderstanding of basic math. If you round down as much as you round up, the net is zero. And even if you somehow have transactions rounded up by four cents every time (which would never happen), after 100 transactions, you would only be out a grand total of $4. No one will go broke (or get rich) because of this.

Why the penny is useless

Everyone knows that you can’t buy anything for a penny, or even a few pennies. Even a quarter doesn’t get you anything of value anymore.

And even if you save up your pennies and use a Coinstar kiosk to convert them into usable cash, you’d need a stack about six inches high to net yourself a single dollar, which is itself not going that far these days.

And as for those take-a-penny, leave-a-penny trays? You might as well just throw them away. But you can’t, because it’s illegal to throw away currency.

We’ve eliminated coins before

Lest you think that we’ve never gotten rid of a coin before, we have. We used to have a half-penny coin. It’s true!

It was minted from 1792 to 1857. So it’s been gone a long time, and you probably have never seen one.

Why was it discontinued? Because it was deemed not worth it anymore. Also, its metal composition was approaching the value of the coin.

Sound familiar?

Now here’s where it gets interesting. Using an inflation calculator, we find that a half-cent in 1857 is roughly equal to $0.37 today.

That means that a coin worth $0.37 was once deemed pointless!

Taken by that same logic, we should be stopping production of nickels, dimes, and quarters immediately too. Which, now that I think of it…

Let’s get rid of more coins

And in fact, I think we shouldn’t stop with the penny. We should get rid of the nickel too.

The nickel has the same issues as the penny, but its value is even more out of sync: it costs almost $0.15 to make a single nickel!

A dime doesn’t have the value-of-metal issue that pennies and nickels do, but that still doesn’t change that a dime is functionally just as useless. And two or three dimes is basically a quarter!

The menu says it all

Is it so far fetched to get rid of the penny, nickel, and dime? In effect, many establishments have already done so.

Here is a menu from a local McMenamins pub that I just went to.

Notice anything interesting on this menu? Look at how so many of the prices are in whole numbers. And the prices that do require change are all in $0.25 increments.

This menu has eliminated the penny, nickel, and dime.

More expensive restaurants have gotten rid of the decimal point outright. When things cost $84 or $115 or whatever, what’s the point of adding two more digits after the decimal point?

Significant figures

In my opinion, in most cases, prices only need three significant figures. This means that as things become greater than $100, there’s no purpose in adding a decimal point.

Other countries have been here before us. For example, Japan’s currency, the yen, has an exchange rate of about 150 to the dollar. So a single yen is worth less than a cent, but you can think of them as being roughly equal.

What would be the point of fractional yen? None right? Well, Japan used to have the sen, with 100 sen being equal to a single yen. It was basically a penny’s penny, and over time, it became worth a nothing’s nothing!

It was discontinued in 1953. No one would think a sen is necessary today when everything is denominated in hundreds of yen at a minimum.

That is our future too. We may not be there yet, but as everything gets more expensive and inflation naturally devalues currency, the purpose of coins worth less than a cent will eventually pass, just like the sen. (A sen-set?)

It’s time for change

Getting rid of the penny was a good decision, even if it’s going to lead to the expected chaos of a plan that wasn’t well thought out. (For example: what will happen to the 300 billion pennies that currently exist?) But I would expect nothing more from this government.

To me, this falls under the heading of “a stopped clock is right twice a day”. Even someone as incompetent and malevolent as our president will do something good eventually, if only by accident. It’s not going to move the needle on government finances, but it’s fine.

But don’t shed a tear for the lowly penny. It served us well for over 200 years, and is just no longer needed.

If you love pennies, feel free to keep them and enjoy them, as they are still legal tender. Maybe you too can pick up a folio called “Lincoln Cents”. They’re still for sale.