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How to make a penny, cont'd

giantpenny.JPGThe comments to Friday's graphic on the many steps -- and two cents -- needed to mint a single penny included this gem:

That diagram is missing a few very important steps outside of the manufacturing process, most notably the lobbying and contributions from the zinc industry, which is one of the main defenders of the worthless coin.

Over at Freakonomics at the NYT, Daniel Hamermesh had an interesting idea to get around the zinc lobby's devotion to the penny: use zinc in a (yet another) dollar coin.

That's a smart idea and a sad commentary on how government works. Speaking of which, a bit of googling led me to a 2007 New York Times op-ed on the subject by Austan Goolsbee. "How dumb do you have to be to mint money at a loss?" He asked. Goolsbee, of course, is now chairman of the Council of Economic Advisers. And he's not alone: Greg Mankiw, who chaired the CEA under Bush, is also an anti-penny crusader.

By Ezra Klein  | October 25, 2010; 11:03 AM ET
 
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Comments

There was a great New Yorker article about the making of the penny, how much it costs, how it has changed, legislative efforts to get rid of it, the lobbying of the zinc industry (including paying for an economist to estimate the cost to consumers of getting rid of the penny), etc. According to the article, it also costs about a dime to make a nickel.

http://www.newyorker.com/reporting/2008/03/31/080331fa_fact_owen?currentPage=all

Posted by: tysonsahib | October 25, 2010 11:33 AM | Report abuse

I saw a penny on the ground today. I did not pick it up.

Posted by: markw2701 | October 25, 2010 12:06 PM | Report abuse

Umm, most government activities run at a loss. We have the government do them precisely for that reason, since they generate large external benefits that can't be easily charged to the users. Where is the profit in paving streets or building bridges? Pennies grease the wheels of commerce, besides providing the raw material for those great machines that stamp out souvenirs at Disney World, providing great happiness to millions of children. Unless externalities are taken into account, it's disingenuous to say that they shouldn't be minted because they don't generate a profit.

Posted by: davidleetodd | October 25, 2010 12:14 PM | Report abuse

So what you're saying is, in 2007, the current Chairman of the Council of Economic Advisors predicted the following:

"there is a good chance that we will find ourselves in an outright coin shortage of a form we have not seen in four decades and one that harks back to the monetary problems of medieval times."

Funny, I must have missed that when it happened.

And the penny is NOT worthless. It's worth a penny.

Posted by: Hieronymous | October 25, 2010 12:14 PM | Report abuse

The problem with pennies (and coins in general) is that you can no longer pull a handful of coins from your pocket to make a purchase. To make coins useful once again, we would need to drop the bills under $20 and add coins for the $10 and $5. Might as well dump the penny at the same time. For my money (pun intended), we could also dump the nickel, except that would create an impossible change situations for any price not manageable with quarters. To dump the niokel, you would also have to dump the dime.

Posted by: truthwillout | October 25, 2010 12:31 PM | Report abuse

ORRRRRRRRR... We can create a new 99 cent coin like in Married with Children: http://www.youtube.com/watch?v=hFvrRE9xIzE

Posted by: chrisgaun | October 25, 2010 12:42 PM | Report abuse

If your pay is over $10/hr (16 cents/minute) then it probably costs you more in time to pick up a penny then the penny is worth.

Posted by: wiredog | October 25, 2010 2:19 PM | Report abuse

@davidleetodd - according to the New Yorker article I posted above (which is basically everything I know about pennies), by law the government cannot print money at a loss, but since the government makes a profit on higher denominations (I think the silver dollar costs something like 20 cents each), the higher denomination coins subsidize the pennies and nickels, so the government does make a net profit. The penny itself doesn't seem to be contributing much, otherwise the zinc industry probably wouldn't need to lobby to save it. But in general I agree that the government should do some things even if doing so is not profitable.

Posted by: tysonsahib | October 25, 2010 2:49 PM | Report abuse

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