End the Penny
By David Henderson
Here’s an entertaining criticism of the penny. In 2006, I supervised a thesis in which my student made the case for eliminating the penny. The author, Stephanie King, was at the time a Major in the U.S. Marine Corps. A quote from the thesis:
For more than twenty years, the Department of Defense (DOD) has eliminated the use of pennies in its facilities at its overseas bases. Since these bases are located in areas such as Japan and Germany, remote from normal circulation of U.S. money, the transportation of currency proved to be costly. These “jingle runs,” as they are referred to in the Pacific region, consist of the transportation of currency on Air Force planes operated by the Air Mobility Command. The coordination of the currency transfer is operated by each of the major commands around the world. For the Pacific region, the United States Pacific Forces Command (PACOM) performs these “jingle runs.” A careful analysis conducted by students at the Naval Postgraduate School determined that the cost of these runs, including transportation costs, handling costs, and transfer costs, was about $130,000 for four trips conducted annually. And these costs do not include the transportation of pennies because the DOD had already stopped using them at the time of the NPS study.
The DOD decided that it was too expensive to continue to transport pennies to these locations and instead implemented different approaches for dealing with cash transactions that ended in cents. Its approach for dealing with this is two-fold. The first approach is used at more permanent overseas bases such as those located in Germany and Italy. Here, it implemented the rounding system on cash transactions. The second approach pertains to Morale, Welfare, and Recreation activities in war zones overseas. In hostile environments, military facilities that operate in cash transactions use cardboard coins in the denominations of 5, 10, and 25 cents.
HT to Jeff Hummel and Tyler Cowen.