The Answer Is Transaction Costs The Price of Pennies: Make or Buy?
Jun 24, 2025
Dive into the quirky world of pennies and the surprising inefficiencies of their production. It costs more to make a penny than it’s worth, leading to a massive annual loss for taxpayers. With nearly 130 billion pennies sitting idle, the discussion leans toward innovative solutions like a buy-back system. Also, explore the amusing economic comparison between grass seed and bread prices, revealing unexpected factors that influence costs. Get ready for some laughs as complex economics meets everyday currency debates!
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Fundamental Make-or-Buy Concept
- The make-or-buy decision applies broadly to families, businesses, and nations and influences efficiency and cost-effectiveness.
- Adam Smith emphasized it as a maxim for prudent management, now central in business education.
The True Cost of Pennies
- Producing a penny costs 2.72 cents, causing a taxpayer loss of about 1.7 cents per coin.
- Most pennies lie idle in jars and drawers, making penny production economically wasteful.
Environmental and Practical Costs
- Penny production causes environmental harm from mining zinc and copper with little return.
- Other countries like Canada have eliminated pennies without negative effects on transactions.
