More than a penny
False friends in analytics
Farewell to the penny.
The current U.S. administration has decided to get rid of the "penny."
One of the reasons cited by many reports of the penny's demise is that it costs more than a penny to make a penny. Here's a quote from AP (link):
“For far too long the United States has minted pennies which literally cost us more than 2 cents,” Trump wrote in an online post in February. “This is so wasteful!”
This is an example of a false friend that sounds reasonable, but in fact the reasoning buckles.
You can see this by asking: does it cost $100 to print a $100 bill? Should it cost $100, or anywhere close to it?
The cost efficiency of money-printing must be judged in aggregate; one shouldn't pick out one unit of currency and analyze it separately. The system is set up so that the printing of $100 bills subsidizes the printing of pennies. By that metric of "wastefulness," a lower denominated currency is going to be wasteful relative to a higher denominated one.
A better reason to get rid of the penny is that inflation has rendered it useless. Nothing can be bought for a penny; very few items can be had for even one dollar these days in the U.S. So, its death is better attributed to loss of utility.
