Thursday, August 30, 2012

Superman and The Great Penny Salami Slice of 2012!

The Huffington Post is screaming about it-- Chipotle Caught Cheating Customers Out Of Pennies, Will Stop Rounding Up Checks.    
   An article in  New Jersey's Star Ledger blew the whistle on the practice (I believe the word Bamboozle was used).
     I immediately thought of Richard Pryor's Gus Gorman character from Superman 3 'salami slicing' his way to unfathomable ritches by using a computer program to skim off fractions of cents within a big corporation and deposit them into his account. And I think that is probably the reaction the headline writer at Huffington was going for.

But if we can step back from the idea of a company 'cheating customers' and look at this as an economist would .......well, actually, economists have, in fact, been talking about pennies for a while now.

Alan Blinder used to write a regular column in Business Week and as far back as 1987 he was calling for the elimination of the coin in an article that he once told me got the most vociferous response (mostly negative) than anything he had ever written up to that point.

According to Alan, "Yes, the old copperhead has outlived its usefulness and is by now a public nuisance something akin to the gnat. Pennies get in the way when we make change. They add unwanted weight to our pockets and purses. Few people nowadays even bend down pick a penny off the sidewalk."

Almost 10 years later, Greg Mankiw weighed in with an anti penny piece himself:
" When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful. It is just wasting peoples' time--the economy's most valuable resource."

Well, once Superman got involved, things did not work out so well for Gus Gorman and it seems Chipoltle is backing down from its practice and actually now rounding down.

What say you economists? If you asked your students about this, what would they say?

John

Oh, BTW, you can hear both Alan Blinder and Greg Mankiw along with Jim Gwartney and Dan Gross and some of the most creative Economist Educators in the country this November at our 8th Annual Economics Teaching Conference in Orlando. Sign up now. Papers are still be accepted as well.

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