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Good Money: Birmingham Buton Makers, The Royal Mint, and the Beginnings of Modern Coinage 1775-1821
Good Money: Birmingham Buton Makers, The Royal Mint, and the Beginnings of Modern Coinage 1775-1821
London Publishing Partnership
Institute Of Economic Affairs, 2008
1 pp., $29.99

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Robert Whaples

Change They Could Believe In

How to resist cozy, lazy, government monopolies.

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 ...

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