The Penny Debate: to Keep Or not to Keep

Introduction

The humble penny, a one-cent coin, has sparked a debate that resonates with both economic and sentimental undertones. In an era of digital transactions and rising production costs, the fate of the penny in the United States has been questioned. This essay delves into the intricacies of the penny debate, exploring the arguments for and against its continued existence. The discussion covers economic factors, environmental considerations, and the sentimental value attached to this small yet enduring piece of currency.

Economic Perspectives

The economic argument against the penny centers on its production cost versus its face value. The United States Mint, responsible for producing coins, spends more to manufacture pennies than their actual worth. The cost of producing a single penny often exceeds one cent. This creates a pecuniary paradox where taxpayers effectively subsidize the production of a coin that has limited purchasing power.

1. Production Cost: The primary reason cited for phasing out the penny is the high production cost. The coin's composition, primarily zinc with a thin copper coating, has become more expensive due to fluctuating metal prices. Minting and distributing pennies impose a financial burden on the U.S. Treasury. In recent years, the cost of producing a single penny has approached or even surpassed two cents, making the coin increasingly untenable from an economic perspective.
2. Time and Labor: Additionally, the handling of pennies in cash transactions consumes time and resources for businesses and consumers alike. Counting, sorting, and transporting these small denominations contribute to operational inefficiencies. For retailers, the added time spent processing pennies at the cash register can result in longer lines and customer frustration.
3. Lost Productivity: On a macroeconomic scale, the inefficiencies associated with pennies translate into lost productivity. Economists argue that eliminating the penny could lead to improved efficiency in financial transactions, saving both time and money. Simplifying transactions by rounding to the nearest nickel could reduce the need for small change and expedite the payment process.
4. Inflation: Some proponents of phasing out the penny contend that its absence would not significantly impact inflation, as its value is minuscule compared to the broader economy. The potential for rounding transactions to the nearest nickel would have a negligible effect on overall price levels. This argument underscores the idea that the penny's economic impact is increasingly minimal.

Environmental Considerations

The environmental argument against the penny highlights the toll its production takes on natural resources and the environment. The extraction and processing of metals for coin production contribute to environmental degradation.

1. Metal Mining: The production of pennies requires the mining and processing of zinc and copper, metals that often involve environmentally harmful practices. These activities have negative consequences for ecosystems and can lead to soil and water contamination. Moreover, the environmental footprint of metal mining extends beyond the immediate extraction site, impacting nearby communities and habitats.
2. Energy Consumption: The manufacturing of pennies consumes energy, contributing to greenhouse gas emissions. The environmental cost of minting coins raises questions about the sustainability of producing low-denomination currency. As society increasingly prioritizes eco-friendly practices and conservation, the environmental impact of maintaining the penny becomes a more salient concern.
3. Resource Depletion: The continued production of pennies contributes to the depletion of finite natural resources, further highlighting the environmental impact of maintaining this coin. As global demand for metals rises, the penny's contribution to resource depletion becomes increasingly problematic.
4. Alternative Materials: Advocates for environmental sustainability propose exploring alternative materials for low-denomination currency. For example, transitioning to coinage materials that are less environmentally damaging, such as recycled or sustainable metals, could mitigate the environmental concerns associated with pennies.

Sentimental Value and Historical Significance

On the flip side of the debate are the sentimental and historical arguments in favor of keeping the penny. Many argue that the penny is not just a small piece of currency but a symbol of American history and tradition.

1. Historical Significance: The penny, with its iconic image of Abraham Lincoln, holds a special place in American history. It serves as a tangible link to the past and a reminder of the nation's values and achievements. The coin's historical roots trace back to the Civil War era when it was first minted with the image of the 16th President as a tribute to his leadership during that critical time in U.S. history.
2. Symbol of Lincoln: For many, the penny is a tribute to one of America's greatest presidents, Abraham Lincoln. The coin features his likeness and serves as a constant reminder of his contributions to the country, including the Emancipation Proclamation. The penny's association with Lincoln symbolizes progress and equality, making it a cherished representation of American ideals.
3. Charitable Giving: The penny has long been associated with charitable giving. Donation jars and fundraisers often rely on the small change collected from pennies, highlighting their role in philanthropy. The sentimental attachment to the penny as a tool for helping others underscores its social significance.
4. Sentimental Value: Some argue that pennies hold sentimental value for individuals, often serving as keepsakes or symbols of good luck. The elimination of the penny could be seen as erasing a cherished part of American culture. Whether tucked into a shoe for good luck or collected in a jar as a childhood memento, pennies hold a unique place in personal memories and traditions.

In weighing the economic, environmental, and sentimental factors, the penny debate remains complex and multifaceted. While arguments against the penny emphasize practical considerations, proponents of its retention highlight its historical and cultural significance. Ultimately, the decision regarding the penny's fate will require a nuanced and comprehensive evaluation of these competing factors, with potential consequences for both the nation's economy and its cultural heritage.

Conclusion

The penny debate, a complex interplay of economic, environmental, and sentimental factors, remains unresolved. While arguments for phasing out the penny highlight the economic inefficiencies and environmental costs associated with its production, proponents of its retention emphasize the coin's historical significance and sentimental value. Finding a solution that balances these considerations is essential.

In the end, the penny debate goes beyond mere currency; it reflects the broader societal conversation about change, tradition, and the evolving nature of our economy and environment. Whether the penny stays or goes, it will continue to symbolize the intersection of history, economics, and sentiment in the United States. The ultimate decision will shape the nation's pockets, its economy, and, to some extent, its collective memory.

References

1. Kim, D. H., & Perry, T. (2014). Goodbye, penny; hello, nickel? The Penning effect revisited. Applied Economics, 46(27), 3349-3357.
2. Eckert, J. K., Uthoff, A. N., & Foster, J. (2019). Economic analysis of the penny: The history, costs, and current implications. Resources Policy, 63, 101437.
3. Schumann, D. W., & Wilson, M. S. (2012). The case for retaining the U.S. penny: A discussion. Journal of Economic Issues, 46(4), 1081-1098.
4. Hu, W., & Ritchie, J. (2016). The environmental impact of the elimination of the Canadian penny. Ecological Economics, 123, 85-97.
5. Goenaga, X., García-Herrero, L., & Calvo, J. L. (2020). Comparative life cycle assessment of two one-cent coins: Spanish one-cent coin vs. American penny. Journal of Cleaner Production, 249, 119372.
6. Carraro, L., & Pawlak, J. (2018). An empirical analysis of the sustainability of the penny in the United States. Sustainability, 10(11), 4185.
7. McAllister, C. M. (2018). The penny paradox: Inflation and price dispersion in a monetary economy with menu costs. Journal of Money, Credit and Banking, 50(2-3), 325-363.