I’m not sure if there are any good arguments in favour of keeping the penny, but there is a bad argument from David Howden who teaches economics at St. Louis University. Howden thinks that the high cost of making pennies puts the brakes on inflation. Back when money was made out of gold, governments were limited in creating more money by the cost of acquiring gold. Howden believes that the high cost of pennies has a similar effect on modern governments that seek to create new money.
According to Howden each penny costs about 1.5 cents to make. With more inflation the nominal cost of each penny rises causing an increasing “loss” per penny. Howden believes this effect helps to hold the government back from causing ever more inflation. This effect is obviously miniscule compared to the costs associated with gold back when we used the gold standard for money.
The cost of handling pennies by businesses is a drain on Canada’s productivity. I’m sympathetic to frustration about governments using inflation to deal with past overspending, but continuing to make and handle pennies is not the answer.
A common unfair tactic in debating is to highlight good arguments for your own point of view and bad arguments for the other side. One could argue that I’m guilty of this in the penny debate. So, I invite penny supporters to write comments offering reasons to keep the penny.