My older son, David Ricardo Palmer, sent me this photo, a commemoration of my role as "Godfather of the 'Ban-the-Penny' Movement."
A Cadillac from the early 1950s, covered with pennies.
My older son, David Ricardo Palmer, sent me this photo, a commemoration of my role as "Godfather of the 'Ban-the-Penny' Movement."
A Cadillac from the early 1950s, covered with pennies.
It is really hard to believe the US is so far behind Canada, Australia, New Zealand, et al. when it comes to currency types and materials.
The US was quite avant garde when it brought out the Susan B Anthony $1 coin. If they had stuck with that and stopped printing the $1 bill, they'd be way ahead of the game.
In the controversy about whether the U.S. penny should stay or go,most women want pennies to stick around, but men want to get rid of them. In the latest Investor Pulse survey from Spectrem Group’s Millionaire Corner (www.millionairecorner.com), 57 percent of women believe the United States should keep the copper coin, while 62 percent of men think the U.S. should get rid of it entirely. ...
Only 14 percent of respondents think the U.S. should get rid of dollar bills, with men again more likely to say they’d like to see them go (20 percent of men versus just 6 percent of women).
I really wonder if people in the US understand that the costs of these decisions [to keep the penny and the $1 bill] are likely well over $100m/year. Per year! That's a pretty high opportunity cost to bear for the sake of those traditions.
Addendum: After I had written the above, Jabber posted this photo on FaceBook:
You can buy 100 plastic pennies for $3.49 for your kids to play with; or you can just give them a dollar's worth of pennies. Duh.
As Jabber pointed out, if you can't make even plastic replicas of your currency for less than the face value of your currency, it is probably time to reconsider whether keeping that currency makes any sense.
Woo Hoo! I'm famous (hah!).
From a recent email,
Dear Professor Palmer,
You have been selected for inclusion in the AcademicKeys Who's Who in Social Sciences Higher Education (WWSSHE)....
The following professional information will be published for you:
Your Name: John Palmer
Academic Title: Emeritus Professor
Department: Department of Economics
Institute: University of Western Ontario
Field(s) of Expertise:
This is likely some directory or vanity publishing scheme. I'm not really all that impressed and you shouldn't be either.
I was, however, especially tickled that it says "None listed" for "Field(s) of Expertise". I went to their site and changed that to "Elimination of the Penny."
Ms. Eclectic and I have pre-planned and pre-paid for our funerals and burials, including the grave marker.
In keeping with my moniker, "Godfather of the Ban the Penny Movement", we had a cut-out made at the bottom of a column of hearts and glued a penny there.
The penny is from 1982, the year we were married (thank you Karen L and Nick K and others for providing us with several 1982 pennies!)
Prices in shops should be rounded up or down in an effort to do away one and two cent coins, a report recommends today.
... The Central Bank found that one and two cent coins are not actively used by consumers and are expensive to mint. In many countries, including the Netherlands and Finland, low denomination coins have effectively been removed from circulation through the use of the rounding rule. [EE: also Canada, Australia, and New Zealand]
With this rule, goods and services are still priced in multiples of one or two cent but are rounded up at the till. For expample [sic] a bill of €56.21 is rounded down to €56.20 while a bill of €56.23 is rounded up to €56.25.
The NPP says a pilot should be run in a mid-sized Irish town to investigate consumer and merchant reaction to the use of a rounding rule in Ireland. Bray, Co Wicklow, and Drogheda and Dundalk in Co Louth are in the running to be chosen to pilot the scheme.
Do a pilot study? why? They've done the reading and the research, and eliminating the low-value coins is a plan whose time has come. Just do it. The entire Euro block should do it.
If they have some doubts, they should hire EclectEcon as a special consultant!
Brian also wondered if there is any symbolic meaning in the photo that accompanied the article. It is from a mint in Athens, Greece:
For my testimony before the Senate Finance Committee, see this.
Addendum: For considerable precedent in many other countries, see this section at Wikipaedia.
Thanks in large measure to my efforts*, Canada is now in the process of eliminating the penny. It's an odd feeling when a store rounds the cash price up or down, but eventually we will all get used to it.
Now there are increasing questions about whether the US will also eliminate the penny. They should:
This article in The Economist has the right idea, but it looks as if the lobbyists there will fight penny elimination successfully a bit longer.
Penny lovers and zinc-industry lobbyists counter that the coin’s demise would cost consumers, as merchants would round their prices up to the nearest nickel. But some economists disagree, suggesting that shop keepers might well round down in order to avoid moving from a price of, say, $9.99 to $10. Americans anyway seem willing to accept a fee for penny removal, as evidenced by the self-imposed cost of leaving them idle and the success of coin-counting machines, which take a cut when turning them into bills.
Other countries have eliminated low-value coins with less-than-dire results, and indeed, so has America. In 1857 it ditched the half-cent, which was then worth nearly as much in real terms as today’s dime. This has led some to suggest killing the nickel, which costs about ten cents to make, as well as the penny.
*Well, maybe not "in large measure". Actually my writings were both advocacy and predictive. I was, indeed, advocating the elimination of the penny, but at the same time I was arguing/predicting that we (in Canada) would eventually get rid of it regardless of whether my arguments carried any weight.
The same thing holds true for the US. It will happen. It's only a matter of time, depending in part on the strength of the lobbyists opposing the move and depending in part on the clarity of the arguments favouring the move.
Former journalism student from many decades ago, Hank Daniszewski, writes in the Freeps, [h/t Joe]
THE PENNY PROSECUTOR
Pulling the plug on the penny can’t come soon enough for John Palmer, a retired economics professor in London who’s long been one of the nation’s leading proponents for abolishing the penny. He even appeared before a Senate committee studying the issue.
Besides its high production cost, Palmer argues pennies have long been useless as currency and are a nuisance for retailers and consumers.
“I’m surprised merchants have not been making more changes in anticipation. I see more ‘penny cups,’ but merchants have not started rounding out prices,” said Palmer.
He said Canada should soon take the next step and eliminate the five-cent coin.
“Some people will feel nostalgic, but I don’t think most of us will miss the penny much.” said Palmer.
"The Penny Prosecutor"????
Note: when production AND distribution costs are included, it cost up near about four cents per penny to produce and distribute the coin. Let's celebrate!
The last Canadian one-cent coin was minted last May. And on February 4th, the Royal Canadian Mint will stop redistributing one-cent coins to financial institutions.
To celebrate this change, the Canadian Mint has put out an "info graphic" about the history of the penny [ht Devin].
Quite frankly, I'm surprised that so few retailers have not already converted to a penny-free environment. When I ask cashiers if their shops have started to prepare for getting rid of the penny, usually I just get a blank stare or puzzled look.
Oh well, it'll happen soon. And it'll be in the news some more.
Meanwhile, I'm still awaiting my invitation from Ottawa to attend the gala celebration as the last pennies are shipped out from the Royal Mint.
For all my earlier writings on pennies, see this.
In February, the Bank of Canada will stop distributing pennies in Canada. Given my history and notoriety in recommending that Canada abandon the penny, I think they should have a special ceremony and let me send the last penny out into circulation.
I mean, how often is it that someone from UWO is mentioned in a University of Trono publication like this:
The Bank of Canada has announced it will phase out the penny. Why now?
John Palmer, an economist at Western University, has been telling the Bank of Canada to get rid of the penny for the past 30 years. Pennies are a nuisance. How many people nowadays would stop to pick up a penny off the ground? A century ago, you could pay for a chocolate bar with two or three pennies; now they have no real purchasing power. And they cost the bank 60 per cent more to produce than they’re worth. The question is why the bank took so long! The answer is that it probably just came down to inertia. In any institution, there’s always risk with change.
Actually, it's been only about 23 years or so, but who's counting?
As my friends informed me earlier, Canada will stop minting the one-cent coin in the fall. From the National Post,
The Royal Canadian Mint will no longer make pennies as of this fall, with Mr. Flaherty calling the penny a “currency without any currency” that costs more than a penny-and-a-half to make. He suggested Canadians donate their stockpiled pennies to charity.
And from the Globe and Mail,
Perhaps the measure that will have the most visible and universal effect on Canadians is a plan to eliminate the penny. Starting this fall, the Royal Canadian Mint will no longer put pennies in circulation, saving the government $11-million a year and bringing Canada in line with countries such as New Zealand and Australia. (Consumers will be able to continue using pennies “indefinitely,” but prices will be rounded to the nearest five-cent increment if pennies aren’t available.)
There are some errors (I hope) in these stories and/or in Flaherty's statement.
Friends tell me that today's budget calls for Canada to get rid of the penny. I can't find any link to that item in the online news, yet, but if so, you can thank me. I've been urging Canada to eliminate the penny for over 20 years. See here for just one example.
As I have traveled through the United States over the past few years, I have noticed that there are many special-issue coins there: the quarters honouring different US states, the different Jefferson and Buffalo nickels, and the variations even in the one-cent coin.
At the same time, in Canada, we have had comparatively fewer special-issue coins that actually find their way into circulation: the poppy quarter to honour veterans, and the 2010 Olympic games quarters featuring different winter sports are the ones I recall seeing most, but of course the looney ($1 coin) commemorating the 100th year of the Saskatchewan Roughriders was popular in Saskatchewan last fall.
I save all the special-issue coins I receive. It's almost as if I'm lame enough that I buy coins from the Franklin Mint and the like, but it's not quite that serious. One exception occurred when I bought a $10 roll of quarters featuring the sport of curling and took them to the curling club, where I passed them out; I didn't save those, but I expect many of the folks there did.
For years, every time I received a special-issue coin, I'd throw it into a separate container on my dresser. I kept telling Ms. Eclectic I was saving them in case any of our grandchildren ever started a coin collection. Meanwhile, of course, it's as if I was buying those coins from the mints as collectables. I paid face value which, most notably for quarters and loonies, was well-above the minting costs, and the mints were profiting from my decision to save the coins.
Then last winter, much to my surprise and delight, I heard one of our grandchildren half complain when she received in change the special one-dollar coin commemorating the 100th year of the Saskatchewan Roughrider football team. As I recall she said,
"Darn, now I don't have any money"
Me: "Why not? You have a looney."
Granddaughter: "But this one is special. I can't spend it."
It turns out that she, like me, saves all the special-issue coins. So as we were down-sizing, purging, cleaning out our house as we prepared to move to our apartment condo, I dug out the container of coins that I had and passed them on to her.
In the process of collecting these coins and passing them on to our granddaughter, several things occurred to me:
Seigniorage is a convenient source of revenue for some governments. [note the misspelling of gubmnts].
An additional observation: it turned out that when I gave all my special-issue coins to one granddaughter, I realized she was receiving a lot of coins with a total value that was pretty high. To try to balance the gift by giving something of equal value to her sister, I offered her sister my treasured skunk skin. For some inexplicable reason, that didn't seem to go over so well.
Addendum: it strikes me as silly for the US mint to bring out special-issue pennies. When the distribution costs are included with the production costs, surely those pennies earn negative seignorage, i.e. lose money. By encouraging people to save those pennies, all the US mint is doing is increasing the demand for the pennies and increasing their losses. It all reminds me of the joke about the sociologist who went into business. When it was pointed out that the business was losing five cents on each item sold, the sociologist responded, "I know, but we make up for it in volume." I have to wonder if a sociologist is making the decisions about minting special-issue pennies in the US.
Update: Well, here's an interesting form of seignorage: the $5trillion coin.
Is there anyone anywhere who disagrees with getting rid of the penny? It is really hard to find any opposition to the idea. And yet, the Canadian mint keeps stamping them out (as in minting rather than eliminating). From the Star-Phoenix (h/t KarenL):
Polls suggest that only about 35 per cent of Canadians want to keep the penny. You’d find a similar percentage wanting to keep rotarydial telephones and eight-track tape players. If we listened to them, we’d still be using shinplasters as currency.
I really wonder what the gubmnt is afraid of, why they are reluctant to do this. Are they concerned that the opposition would use it as an election issue, as in,
We have all these problems in Canada [followed by list] and what does the party in power focus on? The triviality of whether to keep the penny! Elect us and we will deal with the real issues of the day.
Or something like that. Of course, I'd love it. This issue is clearly one that should be dealt with sooner rather than later, and the gubmnt should make its case.
If I had to choose whether to keep the penny or OISE, I would vote to keep the penny and get rid of OISE. Here's just one reason. From the introduction to that item:
The following is an analysis of all of the 36 currently internet-available theses completed at the SESE department of OISE, University of Toronto.
In half the cases, these theses appear to be so marred by political jargon and political preconceptions that they should never have been accepted into the corpus in which they are in fact found, viz. a collection of putative contributions to knowledge -- theses officially certified by the University of Toronto.
It looks as if the Senate Finance Committee of Canada will accept my recommendation (among others) and urge the gubmnt to eliminate the penny. As news of the Senate's recommendation has hit the newswires, I have, of course, been swamped with calls from the media given that I was once referred to as "the godfather of the ban-the-penny movement."
As a result, tomorrow (Wednesday) morning I will be interviewed by at least ten different CBC radio stations between 5am and 8am Central Standard Time. Unfortunately, I don't know which ones will be interviewing me at which times.
What's the hold-up, folks? I have not seen a single article that talks about wanting to save the penny. And yet, there seems to be some sort of hold up [h/t Scoop]. My guess is that the delay comes from bureaucrats at the Royal Mint.
Canada’s upper chamber has decided whether the penny should be scrapped or saved.
But Senator Joseph Day, who chairs the finance committee, won't reveal their recommendation until it has been tabled in the Senate.
Ultimately, the Senate's recommendation on whether to kill the one-cent coin or not will go to Finance Minister Jim Flaherty, who asked senators to study its fate.
Flaherty said Wednesday he "appreciated" the senators' "in-depth" study and looks forward "to reviewing the Committee’s findings shortly."
Day said their recommendation will be made public within a week or so, "definitely" before the Christmas break.
"We thought this would take no time at all, but there are a lot of very complicated issues in this and a lot of different interest groups," Day said about why it's taking so long. [emphasis added]
"I never like doing anything where we don't consider all the factors and we have. We've done that."
What's so complicated? Just announce that as of a month from now the mint will no longer produce any one-cent coins.
For more, follow the links here.
20 years ago, EclectEcon advocated getting rid of the penny. Several years ago, Greg Mankiw joined the club. And now Russ Roberts has joined, too.
As several people have pointed out, and as my previous posting on the topic showed, businesses have long been on board with "penny cups" next to the cash registers, and some are beginning to post signs that theirs is a "penny-free environment".
My expectation is that soon pennies will disappear. But it would likely be efficient for gubmnts to hasten their demise.
For more from my testimony before a Senate committee on eliminating the penny, see this.
A few weeks ago, several of my friends drew this announcement to my attention. A donut shop will no longer give pennies in change.
As I wrote several decades ago, the transaction costs alone are enough to deter continued use of one-cent coins in North America. But with commodity inflation, the gubmnts are losing money in the manufacturing and distribution of the coins, and these losses provide added impetus for legislators to eliminate the penny.
For some of my earlier and more detailed writing on this topic, see this.
Canadian MP, Ed Holder, is hosting a poll on his website, asking people whether Canada should eliminate the penny [h/t JB]. As of this writing (Saturday evening) 57% say "yes". Quite frankly I'm surprised and disappointed that the number isn't as high as 80% or higher. Here in Regina, nearly every merchant rounds down for cash purchases to avoid having to use pennies.
As many of you know, I have advocated the elimination of the one-cent coin in Canada for more than two decades. Both Australia and New Zealand have eliminated their one-cent and two-cent coins (and five-cent coins in New Zealand), leading to great savings in metal, distribution costs, and customer waiting times. Canadians will benefit greatly from following their lead.
I was in Ottawa a week ago, testifying along with others about why Canada should eliminate the penny. Those who watched the proceedings on CPAC said we were all pretty persuasive. Besides that, I had fun, and I enjoyed meeting the other witnesses and a few of the senators before whom we were testifying. Here are some photos from the day:
I was quite moved and pleased by the Canadian support for Israel. Alternating flags all down Wellington Avenue [update: oops, Wellington Street] and elsewhere.
Here's the plaque on the building where we testified:
At Phil's suggestion, after the session and before my plane left Ottawa, I did some geocaching. Coincidentally, one of the microcaches had a flattened penny in it!
I'm in Salzburg right now. More about this trip when I get a chance (i.e. a break from touristing).
This is a preliminary draft of the remarks I will make on Tuesday when I appear before the Senate Committee looking into the elimination of the penny. I have no idea whether I'll be allowed enough time to say all this. Comments and feedback welcome.
Ladies and Gentlemen:
Thank you very much for inviting me to be here today.
I first started thinking and writing about the role of the one-cent coin in our economy over twenty years ago. I was prompted to give it somewhat serious consideration one day when, in a longish check-out line, a number of us were held up as several people ahead of us each said something like, "Wait a minute.... I think I have the three cents here." or "Just a minute.... I have the pennies in here with these coins...." I looked at the people in the line and wondered how much time was being wasted while people waited in line as customers and clerks counted out pennies.
At the same time, I realized that even then, in 1990, a one-cent coin wouldn't buy anything. When I was a child, I was able to buy two root-beer barrels, a pack of soft candies, a baseball card with gum, etc. for a penny. By 1990, as a result of inflation, things like these had prices much higher. It occurred to me then that the one-cent coin had out-lived its usefulness. As I wrote then,
Sixty years ago, we had the same denominations for our currency that we have now. But a penny could buy something then. Since 1933, the average price level (as measured by the Consumer Price Index) has increased by a multiple of 20. What we used to buy for a penny would now generally have a price of about twenty cents. "Penny" candy and "penny" whistles are now priced in dollars or tenths of dollars, not pennies.Shortly after I wrote that piece, my younger son, Adam Smith Palmer who was 15 at the time, let me know in no uncertain terms that he thought it was silly of me to have raised such a fuss about pennies. Before the year was out, however, he had completely changed his tune. Why? Because he had a part-time job with a local fast-food coffee shop and did not like having to
In July of 1990, a major Canadian news story picked up my initial writing on this topic, and that story hit the wire services, as I recall, on August 2, the day Iraq invaded Kuwait. That day, and over the next few weeks, many news organizations, looking for a lighter story to add to their news lineup for the day, called me, interviewed me, and added a reference to the idea of getting rid of the one-cent coin to their newscasts or newspapers. Soon I became informally known as the unofficial chair of the "Ban the Penny" campaign, appearing on interview shows, including CBC's The Journal, and making appearances for charitable groups.A few years ago, before appearing on a CBC radio interview, I did a rough back-of-the-envelope calculation about the value of the time lost because of the use of pennies, just to get an idea of only the transaction costs involved with using a one-cent coin. The results were startling:
And these estimates do not include the costs to merchants and financial institutions who have to deal with pennies at their end.
There are numerous arguments that I have come across in the past twenty years for why we should keep the penny. I should like, time permitting, to address them:
Let me add that I know of some merchants, particularly fast-food coffee outlets, who set prices so that after taxes the total on many small-item purchases will not come out even, say to the nearest dollar or so. They do this to reduce employee theft. If I buy a coffee for a dollar and give the clerk a dollar, it is easy for the clerk to say "Thank you", take the dollar coin, but not ring it in, and later put it in his/her pocket. But if the coffee, with tax, has a price of $.94 or $1.02 or something like that, customers will tend not to have the correct change (note: or will hold up the line looking for it), forcing the clerk to ring in the sale.
As you will note, I have not addressed the seigniorage argument. Even though it is a compelling argument, as other witnesses before your committee will show, my approach to the topic has been from the perspective of transaction costs. These costs are in addition to any seigniorage losses suffered by the mint and the federal gubmnt.
Thank you for your time and interest.
- - - - - - - - - - - - - - - - - - - - - - - - - - -
I began arguing that Canada should stop producing pennies nearly two decades ago. Since then, others have taken up the cause.
But a crucial part of my argument then was that the evolutionary process, coupled with inflation, will eventually lead to the demise of the penny with or without formal gubmnt action. It looks as if this prediction is slowly starting to come true. From the CBC [h/t to Ms. Eclectic]:
A cafe in Halifax has taken a Canada-wide proposal into its own hands and declared itself a "Penny Free Zone."
Just Us! Coffee Roaster Co-op on Spring Garden Road began rounding off its prices two months ago to reduce the number of pennies in the till.
The cafe was amassing thousands of pennies this winter after the GST was reduced and prices required one-cent coins to make exact change, said manager Ned Zimmerman.
"If you look at the amount of money you pay someone per hour, the amount of time it takes to fuss around with all those, then it really doesn't add up," he said.
"It became clear to us that the amount of time we spent taking care of pennies wasn't valuable in the long run," he said.
The cafe's policy comes after a private-member's bill suggesting abolishing the penny was introduced in Parliament in April, sparking debate about the copper coin across the country.
For my earlier postings on pennies, see this list.