Friday, March 30, 2012

Imagine This Title Is a Pun on Sense/Cents

The U.S. Congress might force the dollar coin down the nation's collective throat. (Not literally; that's something they do individually with call girls at the Watergate.) Although 70% of surveyed Americans support the continued production of the dollar bill, using a coin instead of a bill would save hundreds of millions of dollars.

There's an idea in economics that people should be willing to pay the same amount to keep something as they would need to be paid to give it up (remember that 52-weeks-of-pay you get for losing your penis and think about that). When someone is willing to pay no more than $2 to get you to stop smoking but says you'd have to pay him $10 for the right to smoke, he's inflating the second number. After all, if $5 is not enough for him to allow smoking, then he should be willing to part with $5 to create a smoke-free environment.

Americans think they have a right to a dollar bill, so they will overvalue what they need when you take it away. But if we could make the use of dollar bills correctly reflect their production costs by charging, say, $1.25 to buy one, you would see dollar bills fall out of circulation all on their own.

Instead of asking people, who have a status quo bias, this change just needs to happen, like Canada's retiring of the penny at the end of the year. America needs to retire the penny, nickel, and one-dollar-bill.


Molly Dove said...

I agree on the dollar bill. I don't know about nickels and pennies. Would we just round up and round down?

I like dollar coins, even the Susan B's that are so similar to quarters.

FastBreak said...

yes, the penny has got to go and I am all for getting rid of the paper dollar if we save some $$$...or rather just not have to print as much