Down with the penny!

Money is defined as a good that is used to make transactions involving the transfer of goods and services.  Using this definition, it would be more efficient to exclude the penny from our national currency.

The penny is a useless coin because its cost of production is more than its face value.

In 2010, it took 1.79 cents to produce a penny.  In the last year, the production of the penny has generated a loss of $27.4 million.

The production of the penny is a huge waste of our tax dollars.  If we stopped the production and circulation of pennies, we would be able to use our money for a better cause, such as funding for education.

Although it seems logical to discontinue the use of pennies, there are some people who have taken a pro-penny stance. One of their biggest arguments is that prices will be higher because everything will have to be rounded up to the nickel. This argument is misleading because it does not take into account the fact that the rounding only occurs for the total price of a purchase of multiple items, and not for each separate item bought.

Robert Whaples, a professor of economics at Wake Forest University and an expert on the history of the U.S. economy, has researched the effects of rounding to the nickel.  Whaples used data from nearly 200,000 transactions from a multi-state convenience store chain to show that rounding would have virtually no effect.

“Customers wouldn’t lose from rounding our current prices, these data say,” said Whaples. “In fact, I found that customers gain just a miniscule amount, about one cent for every 40 transactions, which really amounts to zero. The convenience stores and the customers basically broke even.”

America should question why the penny is around today even though the advantages of abolishing the penny outweigh the disadvantages.  Some could argue that we should keep the penny for the sentimental value.  But is that really worth it if we’re losing money?  Some could also argue that keeping the penny is a way of honoring Lincoln, but we have already done that by putting Lincoln on our $5 bills.

The penny is a useless form of currency.  The emotional attachment to this coin is not worth the money we lose from producing it.