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The Value of Coins and Bills

June 24th, 2012
money, econ  [html]
If I were to buy something costing $0.42 at an American store, they would be a little surprised if I tried to pay with exact change, perhaps impatient if I took too long to count it out, but they would probably take a $20 without comment. In Ecuador a similar store would object to my $20, most likely rejecting my purchase unless I could find something smaller.

In some sense all cash of some currency is worth the same: coins, large bills, small bills, it doesn't matter. In practice, however, people have preferences based on what's convenient. In the US we don't use coins much. I pay for everything in bills, allow coins to collect in my pocket, and then put them in a jar when I get home. I'm not unusual in avoiding coins; many people are happy to let Coinstar have 8% of the value of their coins in place of having to count them. [1] People hate the penny. No one wanted to use dollar coins here, so they built up until we had $1.4B sitting in a basement. In Ecuador, however, people use coins for everything, finding bills both inconveniently large and somewhat suspicious. (I suggested sending our excess dollar coins thither, and we did.)

(The US is not the only place that dislikes coins [2]: in Beijing there's a strong preference for bills, even though in Shanghai they prefer coins. I don't know about other places: worldwide is it more common for people to like coins or find them inconvenient?)

I'm not sure why different places have different attitudes towards coins. It may have to do with local consensus on whose responsibility it is to make change. Perhaps it works well to either make extensive use of coins or avoid them, and so most places move one way or the other?


[1] If you live near a grocery store that has a self-serve checkout with a coin-hoper (not a coin slot) you can take your coins there instead.

[2] There was a time, however, when Americans distrusted paper money. (Though I think they would have the same problem with modern debased coins.)

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