The Penny Doesn’t Make Cents

In my last post, I discussed one pragmatic change that can be made that would save the American Taxpayer money: the replacement of the dollar bill with a dollar coin.  The other obvious currency reform is the elimination of the penny.  This reform may be even harder from a political standpoint, as shown by the fact that a coin corresponding to the approximate value of the penny still exits in both Britain and in Europe.  The elimination of the penny is even more connected to inflation as it shows that money (or at least one form of money) is so worthless it isn’t worth keeping.

But the fact is, it isn’t worth keeping.  And that’s what pragmatism is all about: recognizing the truth and acting accordingly, instead of acting in accordance with what you wish to be the truth.  I see pennies lying in the street quite frequently while no one is interested in collecting them.  Several years ago I learned that the penny costs 1.6 cents to coin, so it is literally worth less than the cost of manufacture.  Trays for “give a penny – take a penny” have proliferated in the past decade.  It isn’t worth keeping track of costs to the nearest penny, even in retail sales.  So why do we continue to worry about the penny?  Why does anyone carry them and save them and spend them?  Perhaps out of habit, or sentiment.  Or only because in large numbers, they still have value.

We are slowly eliminating the penny, not by government action but by popular inaction.  We are slowly growing more and more annoyed with the little coin.  Soon almost every retail counter will have a penny jar and we’ll just drop the pennies into it, like trash.  The only reason we might not is that it takes time to sort out the pennies from the rest of the coins.

The elimination of the penny need not mean the end of pricing to the nearest cent for individual items.  It just means that the final bill will be rounded up or down to the nearest nickel.  This is just like the pricing of gasoline in tenths of a cent, but the final bill is always rounded to the nearest penny.  Shops would probably round their bills down to the lower nickel-multiple value for as long as anyone cared.

The savings from the elimination of the penny would not be as large as elimination of the dollar bill, but it would still be substantial.  And both reforms together would have important symbolic value because both would affect every American.  It would be a little change, and maybe a little annoyance, that would represent the end of narrow thinking and special interests being placed above pragmatism and cost savings.

Once again, I defined pragmatism above as acting in rational accord with the truth.  And on the other hand, ideology is acting in accord with what you think should be the case.  In the case of the penny, the ideologue says that there shouldn’t be inflation, so the penny should make as much sense now as it did 200 years ago.  The pragmatist says there has been something like 10,000% inflation since the penny was created, so it is practically worthless.  It is a hindrance to commerce and a needless expense to the government.

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