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"Time to Eliminate the Penny: Estes Park Can Lead the Nation"
Professor Robert M. Whaples - Wake Forest University
- Feb 2009 -
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A sparkling, newly-minted penny might bring back the innocence and joy of childhood,
but pennies have a dark side as well. For one thing, pennies cost more to make than they are worth. Even worse,
pennies waste our valuable time. At the average U.S. wage, it takes only about two seconds for the typical person
to earn one cent. According to a recent study, however, using a penny probably adds a bit more than two seconds to
the average retail transaction. Picture yourself waiting in line to make a purchase. There are, say, three people
in front of you and each of them decides to pay in cash and either fumbles around for a penny or receives one in
change. If the line's length is constant, each penny use wastes the time of five people (the purchaser, the three
people in line and the clerk). By the time you reach the front of the line this has been multiplied threefold and
a half a minute of time has been literally wasted because when you're waiting in line you can't be doing other things -
perhaps hurrying back to your own business or getting off your feet at the end of a long day. This scene is repeated
untold times each day. Each instance is pretty minor, but with time valued at the average wage and pennies being used
in about one-third of the roughly 100 billion annual transactions, a delay of only two seconds per penny use compounds
to a loss of about $600 million per year - even if no one else is in line.
Some people say that in a penny-free marketplace rounding purchase amounts to the nearest nickel would usually mean
rounding upward and this practice would burden the poor, who use cash more often. However, the evidence supporting
this claim is very weak. Data I recently analyzed on nearly 200,000 transactions from a multi-state convenience store
chain show that there is NO "rounding tax." The number of times consumers' bills would be rounded upward is almost
precisely equal to the number of times that they would be rounded downward. If these numbers don't convince you,
take a look at evidence from the Netherlands. In 2004 Dutch retailers were ready to eliminate use of the one-cent
coin but customers were suspicious. To be safe, they experimented with the idea in a single town, Woerden, where
prices were rounded to the nearest five cents. At the end of the test period, 83 percent of consumers said they preferred
their penny-less world and the Dutch began to use the policy nationwide.
It's time to stop wasting our time and money. It's time to eliminate the penny. Unfortunately, Congress refuses to
take action on this issue. Therefore, to celebrate Abraham Lincoln's birthday and end the association between his
noble name and the pathetic, pusillanimous penny, it's time for an end-run around our timid and distracted politicians.
We need a grassroots movement. We need retailers in a single town or city to come together and stop using the penny.
After customers (and retailers) experience the benefits of a penny-free world, they won't want to go back. They'll want
to dump all their pennies at the nearest Coinstar and never use them again. What better place to begin this effort than
Estes Park? I invite you, indeed I urge you, to join Jim Turner in making Estes Park a laboratory of American democracy.
After living without the penny for a single month, ask yourselves if you miss it. Then, challenge other cities to follow.
Soon people all over the country will be saying: "The people in Estes Park, Colorado pitched the penny and they don't want
to go back. If it worked in Estes Park and it'll work here." If Congress can't show any leadership, then Estes Park
needs to lead the way. Abe Lincoln would be proud of you.
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Robert M. Whaples is a professor and chairman of economics at Wake Forest University, Winston-Salem, North Carolina.
His research article "Time to Eliminate the Penny from the U.S. Coinage System: A Critical Analysis,"
was published in the Eastern Economic Journal in 2007.
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