Penny Foolish

September 20th, 2012


Our Romney video series continues…





“How are you going to win if 54 percent of the voters think China’s economy is bigger than ours? Or if it costs 4 cents to make a penny and we keep making pennies? Canada got it right a month ago. Why isn’t someone saying, ‘Stop making pennies, round it to the nearest nickel?’ You know, that’s an easy thing, compared to Iran.” – audience member question at Romney fundraising dinner
“As tokens of our great and largely undeserved good fortune, we treasure our found pennies and we strive to live by the two commandments our Penny God has given us: Don’t be greedy. Don’t be arrogant.” – the Penny Priestess
“Better to remain silent and be thought a fool than to speak out and remove all doubt.” – Abraham Lincoln


There’s little worse than someone who thinks he’s smart

And mocks others he thinks are dumber.

Unfortunately for America that describes

The people at Mitt’s fundraiser this summer.


Here’s the full leaked video below. I know that the penny comment (at the 2”30 mark of part 2) seems insignificant compared to all the other crap that is said by Romney and the attendees, but it stuck out to me because of the combination of hubris, misunderstanding, and anti-factual analysis that it represents. How stupid, to spend 4 cents to make a penny, right? While that sounds obvious at first, think about it: what happens to a penny after you use it? Does it get thrown away? No, of course not: it’s used again. If the average penny lasts 25 years (a conservative estimate which you can double-check by looking at how old the pennies in your own pocket are) during which time it’s used an average of twice per day, that’s a total of 18,225 times. That represents $182.25 in economic activity per penny over its lifetime. At four cents per penny, that’s a total “transaction cost” of 0.02195%. That doesn’t sound quite as idiotic as a 400% transaction cost, does it? Not only that, but the questioner gets his single fact wrong: as of Feb. 2011, it costs 2.4 cents to make a penny, not 4 cents, making the “transaction cost 0.0132%, or about one-ten thousandth of a penny per cent of transaction value.

Now, I’m not arguing that this analysis proves America should keep the penny in circulation. A good case can be made for eliminating it, as Canada did, but there are many factors to consider. My point is that one needs to analyze those factors, rather than jumping to a conclusion based on a superficial and fundamentally-flawed non-analysis, as this guy does. All his argument proves is that he doesn’t have a basic understanding of how money works, which is ironic since he’s apparently made (or inherited) enough of it to afford a $50,000/plate fundraising dinner.

But that’s not my problem with this guy. Not everyone studies economics. Not everyone has the time or inclination to think about things like this. That’s all well and good. But it’s different when you yourself, pretending expertise, bring up an issue, not to discuss the issue itself but to use it as an example of how smart you are and how dumb your opponents are. Then, not only are you showing yourself to be shallow-minded, but also arrogant (and probably greedy too). And that is much, much worse.

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