New Dollar Coin Destined to Fail

For Immediate Release February 17, 2000

Contact: Alisa Giardinelli
610.690.5717
[email protected]
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New Dollar Coin Destined to Fail, Swarthmore Economist Says

Despite the efforts of the U.S. Treasury to promote a new dollar coin this year, the coin will likely fail, says Swarthmore economics professor John Caskey. "People will initially demand the coin for its novelty and for coin collections," he says, "but don't expect it to replace the dollar bill."

Caskey, who has researched the failure of the Susan B. Anthony dollar, doesn't see a problem with the new coin's design. Rather, he predicts it will fail because of a lack of a process to coordinate the transition to the coin. According to Caskey, people will wait for the coin to become particularly useful, accepted in parking meters for example, before they will carry it for everyday transactions. Similarly, owners of coin operated machines will wait for evidence that people are carrying the coin before converting their machines to accept it. Unless the government orchestrates a coordinated transition to the dollar coin by withdrawing the paper version from circulation, he says, there is little incentive for the private sector to use the coin.

"I'm not convinced that distributing them through Wal-Mart stores is going to be enough," Caskey adds. "There is no other country where a new coin has become widely used while the paper equivalent circulates without limit. If the government intends for the dollar coin to be more than a collector's item, it will have to withdraw the paper dollar. Without that, there's this 'who goes first' question."

An expert on consumer finance and banking, Caskey most recently has focused on pawnshops, check-cashing operations and other financial businesses that primarily serve lower-income people. His examination of the failure of the Susan B. Anthony dollar, co-authored with Simon St. Laurent, appears in the August, 1994, issue of the Journal of Money, Credit, and Banking. Caskey, who received his Ph.D. from Stanford University, has also done research on debit-card usage and community development banks.

Located near Philadelphia, Swarthmore is a highly selective liberal arts college with an enrollment of 1,400. Swarthmore is ranked the number one liberal arts college in the country by U.S. News & World Report.

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