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The Big Problem of Small Change

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The Big Problem of Small Change

Princeton UP,

15 min read
10 take-aways
Audio & text

What's inside?

If you think small change is penny ante, check again. Coinage poses an old puzzle that's pivotal to the value of money.

Editorial Rating



  • Comprehensive
  • Analytical
  • Innovative


Authors Thomas J. Sargent and Francois R. Velde offer a fascinating work of scholarship that studies the history of coinage in broad scope and depth. They dwell on a problem that is no longer a problem: the set value of coins. Internationally, consumers take it for granted that so many units of small change equal a larger unit of money. A U.S. shopper never wonders if 100 pennies could be worth more or less than a dollar. But during most of history, the value of small change was a vexing economic conundrum. The authors explore the evolution of the monetary system from Roman times, taking a circuitous and rambling path that touches on many subjects, from sieges to papal speculations. Regrettably, this book may be inaccessible to readers without a firm grounding in economic history and some comfort with higher math since the authors are scholars and assume that you are, too. Nonetheless, recommends this sweeping book to anyone whose curiosity is piqued by this précis.


What Problem?

Consumers in the United States take it for granted that:

  • Five pennies are worth a nickel, no matter how much copper is in the pennies.
  • Two nickels buys as much as a dime, no matter how much silver is in the dime.
  • Two dimes and a nickel will get you a quarter, consistently, all the time.
  • Two quarters are always as good as a 50-cent piece or five dimes.
  • Anyone would give you a dollar for two 50-cent pieces. Or four quarters.
  • So if you have 100 pennies, 20 nickels, 10 dimes, four quarters and two 50-cent pieces, you have five dollars.

You would be amazed if someone demanded six or seven pennies before they'd part with a nickel's worth of bubble gum, or 15 dimes for a dollar's worth of french fries. But, until quite recently in the history of finance, it was a basic fact of monetary life that you never really knew what a penny or any other small coin was actually worth.

Nowadays, small coins are tokens. The metal in a penny may not be quite worthless, but it's not worth as much as a penny. Until about 1970, you could exchange 100 pennies for a dollar, and the government of the United States would...

About the Authors

Thomas J. Sargent is Berkley Professor of Economics and Business at New York University and a senior fellow at the Hoover Institution. He is the author of The Conquest of American Inflation and other books. Francois R. Velde is a senior economist at the Federal Reserve Bank in Chicago and a lecturer in economics at the University of Chicago.

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