A lot of big news coming out now about thew new Presidential $1 Dollar Coins, set to launch Thursday with the first coin in the series, George Washington. I’ve written this post about the program here. It’s one of the top posts for the entire blog.
I saw this article today on Yahoo News, and I thought it fit right in with the topic of this blog – namely how people can be predictably irrational.
The failure of previous iterations of the dollar coin are common knowledge. Every time it’s the same. Big fanfare, big launch, and then the US Mint produces a huge number of coins that sit in vaults forever because there is no demand for the coins.
An AP-Ipsos poll found that three-fourths of people surveyed oppose replacing the dollar bill, featuring George Washington, with a dollar coin. People are split evenly on the idea of having both a dollar bill and a dollar coin.
Fantastic. This would be a really interesting data point… if the costs of the dollar bill and the dollar coin were the same. It’s nice to know that if everything were equal, people prefer the bill to the coin. This isn’t surprising – I personally also prefer the bill to the coin, assuming both are freely accessible.
Here’s the problem, though. Dollar bills wear out in 18 months. Coins last approximately 30 years. If you do the math on $1 units in circulation, you realize that we spend hundreds of millions of dollars, per year, extra, just to support the dollar bill.
Now granted, in a US budget of over $2 Trillion dollars, maybe the idea of worrying about a few hundred million is quaint. But I guarantee you, the question would have come out differently if you had asked:
“Do you support a federal tax increase of several hundred million dollars to have a dollar bill instead of a dollar coin?”
Rephrase it how you’d like. I know the “tax increase” word is dirty (it’s certainly a way to lose my vote). Try, “how much would you pay extra to have a dollar bill instead of a dollar coin?”
That’s the real issue – we all know people prefer the bill. That is obvious given the failures to launch a coin historically. The question really is, how much is that preference worth? In a world where both “cost the same” to the user, that preference will dominate. But would people really pay extra for the convenience of the dollar, if that cost were visible?
I used to be a big dollar bill fan, but I’ve flipped around now that I’ve seen how successful the coin has been in Europe and Canada. The path is easy:
- Retire the $1 Bill
- Create a $1 Coin
- Create a $2 Coin
The third step is key, since it helps solve the issue of having too many coins as change for a $5 bill.
My only question now is whether or not we’ll ever really complete the conversion to a coin. Right now, the race is between the coin and electronic payment. At some point, cash just won’t matter enough to care.