The Sad Story of the Dollar Coin

The US Mint is going once more into the breach with a dollar coin, an admirable enterprise that will fail again partly because of a fatal design error for the coin itself, but mainly because the government (including Congress) is unwilling to do what’s necessary for its success. This time the hope is that putting all the presidents on them successively will do the trick, but getting a dollar coin to circulate has almost nothing to do with what’s on the coin. The story is a sort of ongoing bleeding sore, and interesting on its own.

Very few developed countries have a bill of as low value as the US $1; the smallest Canadian bill, for example, is $C5, the smallest Euro note is €5. Because coins last so much longer than notes, substituting coins for the $1 bill would save the government a lot of money, in the $100s of millions. So the idea is not goofy, nor was it in 1978 when the mint came up with the idea for a new dollar coin.

Design criteria for such a coin are that it be small and light, but easily distinguishable from a quarter by feel (in your pocket, and by the blind), and easily manageable by vending machines (which rules out square coins, for example). As it happens, if you make each side of an odd-numbered regular polygon a radius from the opposite corner, you get a figure that has corners, so it doesn’t feel round, but also has a constant diameter (the British 20np coin has such a scheme built on a heptagon) and the mint proposed such a shape of eleven sides. As it turned out, the vending machine people hated this idea, because when it rolls, the center of gravity bounces up and down, so the mint made a really bad mistake: they kept the original size, only slightly larger than a quarter, gave it a milled edge, which feels like a quarter’s, and incised a hendecagon inside the rim. It’s hard to imagine a worse result: a silver coin that looks as though it will have corners, but doesn’t, and isn’t otherwise different enough from a quarter to distinguish reliably. Apparently most people really dislike spending a dollar when they owe 25c. The extremely modest reputation of Susan B. Anthony nationally didn’t overcome the nice reverse with an eagle landing on the moon, either, nor did the politically correct demand for a historical woman (not “Liberty”). This coin went out, and came back almost instantly.

In 2000, they tried again, with the Sacagawea dollar. The same size as the Anthony coin so they could be interchangeable in vending machines and rolls, it was given a different color and a smooth edge. Unfortunately, the smooth edge is traditionally used only with small value coins, and the color is a fake-looking goldish plating that ages badly, so the net effect is just cheap. Sacagawea, by the way, was the Shoshone who guided Lewis and Clark and is depicted with a child on her shoulder in a carrier; at least one wag suggested the child was named Gawea and the coin named for the Sack o’ Gawea represented.

These coins are constantly pumped into circulation by, for example, Postal Service stamp vending machines, one of which gave my wife two Anthonys this morning, leaving her muttering about why the stamps cost so much. Surely she would have spent them for quarters if I hadn’t happened to point out what they were, thinking about this post. Got one in change lately? No? Neither have I.

It’s actually a great deal for the government to make coins that go into circulation and get saved, because the difference between the face value and the cost of manufacture, called seignorage, is a free loan. But it’s not so good if they go out and come right back, which is what’s happening to both dollar coins. The problem is that these coins are systematically filtered out of circulation upon their first use in commerce, because there’s no need for them, we have a widely established habit of using dollar bills, and – most important in my view – no place to put them in a cash register. Try it: if you spend one, it goes into the leftmost of the coin trays with the odd half-dollar, Canadian nickel, some paperclips, and a cough drop. Instead of being given out in change, it goes back to the bank with the miscellany and is not seen again until someone buys stamps.

Why not just stop making $1 bills? As they gradually wore out, store clerks and citizens would certainly learn to manage the dollar coins and get used to using them (not without stentorian press outrage, of course). But Congress won’t let the Treasury do that, for reasons that completely escape me. Perhaps the presidential coins will be collected, for a small profit from the seignorage, but they will most assuredly not circulate as long as the governing law nails the mint’s feet to the floor by requiring bills to be out and about, and the sound, efficient financial goals of the whole project will again be sabotaged from the start. Some things can be accomplished bit by bit, like learning to speak French, but some, like a back dive off a board, have to be begun with full commitment from the start; substituting currency forms is in the second category. The whole story reminds me a little of the joke about the British plan to switch to right-hand traffic, under which the new rules would only apply to professional drivers (buses and trucks) for the first week, while cars would make the changeover later.

UPDATE: Kevin Drum and his commenters have been going over much of this ground: great minds in the same track. Actually honesty requires me to note that some of his commenters occasionally fall somewhat short of the point of greatness… 🙂

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

42 thoughts on “The Sad Story of the Dollar Coin”

  1. Whne i worked as a teller, i tried to give out half dollars, dollar coins. Most people took them, but maybe 10percent would get upset and come back and demand a bill, or say i miscounted (which woudl result in me recounting and emphasising the coin. Since this made them look dumb and wrong, they'd usually get even more upset.) I kept trying, as i really enjoyed the coins i had when i was in england. being able to buy a pint with a coin or two is a great feeling.

  2. Uhm, the women of strip clubs will accept them in a coin toss; and yes the more perverted of you are correct in your mental pictures.

  3. Bad design really seems to be the problem. A coin paterned on the swedish ten kroner might work. The swedish coin is about the size of a nickle and half again as thick. I think the thickness gives it a feeling of substance. It is a very nice brass (seemingly) and the art on it has a deeper relief than on most coins. The edge has a finish that is alternating notces and smooth. It is destnctive, convienient sized and gives just the right feeling for a dollar value (ten Kr is worth about $1.20).
    So maybe in another twentyfive years we can try again. Maybe even get it right. Hey young designers, don't forget the ten kroner coin.

  4. Why not: 1. Get rid of the penny, so the dollar coin has a bin in the cash register (and we don't have deal with stupid pennies anymore). 2. Get rid of the dollar bill, but push the circulation of the $2 bill. It takes the $1 bill's place in the drawer and keeps you from having to get 4 of the larger dollar coins when you use a $5 bill to buy something that costs 79 cents. This would ease the pain of getting rid of the dollar bill.

  5. I've also had experiences where cashiers won't take $1 coins.
    Legend has it that the reason for the failure of 50-cent coins and $1 coins is due to a decision of vending machine makers? operators? in the 50s to decline to take them. They didn't want to give out 45 or 95 cents in change, so they chose to only purchase coin acceptor mechanisms that would reject the 50-cent and $1 coins.
    One would have to also pass legislation requiring vending machines to take the dollar coins. Especially since sodas now run over $1 at many locations.

  6. Vending machings are part of the problem, I think. But, at least most are not as bad as the ticket vending machines for the SEPTA regional rail, which won't take any of the new bills or the SGW dollar, but will take a Susan B, or a dollar bill or small coins but nothing else.

  7. I was a cashier once and would try to give out $1 coins as change whenever they found their way into the drawer. I, too, had the experience of people refusing them in favor of a 'real' dollar.
    American coins are rather remarkably small. Why not introduce a $1 coin that's bigger than any of the other coins by a comfortable amount?

  8. As for resistance to the idea of new currency, I remember Steve Forbes running for President in the Republican primaries in 2000, saying that the redesign of the $20 bill had nothing to do with conterfeiting and everything to do with "discarding our cherished American traditions," and that as President the first thing he would do would be to reestablish the "classic" $20 bill design.
    Cultural inertia is a wonderful thing…not…

  9. I've been a fan of dollar coins and two-dollar bills for a long time; I've made a point of requesting both at my local credit union. The cashiers seldom have any 2s on hand; they say that the credit union can't order them, and recently they've been claiming the same thing for the Susan Bs and Sacagaweas. So, if banks don't bother handling them, how can the Mint expect to sell people on the idea of getting them into circulation?

  10. why not just put a hole through the center of the dollar coin? only a moron would mistake for a quarter then–or a chinese coin.
    as for the presidential coins, i cannot wait to start defacing bush 43 dollars with a screwdriver.

  11. Elephant in the room time.
    Could it be that people don't WANT a dollar coin and prefer light, foldable paper to a solid, rigid coin?
    American males carry their money in their pocket or in a wallet. Coins make pockets uncomfortable and obviously don't work with a wallet.
    This is clearly a plan to get red-blooded American men to start carrying purses or to hang coin pouches from their belts!
    Who the heck wants more change in their pocket?
    Makes more sense to make a new 50-cent bill than another dollar coin that clearly very few actually want!

  12. I live in DC and carry dollar coins to give to the homeless – it is convenient, since they do feel different than a quarter in the pocket and I don't have to take out my wallet in the street to give a buck to someone less fortunate. Plus it is guaranteed to be circulated at least once more.

  13. I'm with PocketFullofCoins. I lived in London for some time and absolutely hated the coinage. The dollar bill is light, foldable, easily carried, and far simpler to organize in a wallet than coinage. You need a pretty compelling reason to completely revamp the way people handle their money.
    Yet the sum total of arguments I've seen for dollar coins has been the following:
    1.) They last longer… potentially saving the government "hundreds of millions of dollars."
    2.) Most other countries are doing it.
    I don't find either of these reasons to be particularly compelling. With respect to the first, anything less than a few billion is frankly peanuts (this is what, two Alaskan bridges?), and doesn't really move the cost/benefit scales for me. Regarding the second, I don't see why it matters what other people are doing – I see lots of advantages to our current system.
    Am I missing some great arguments here? I see a far more compelling rationale for, say, moving to the metric system than I do for dollar coins.

  14. Contrary to the snotty suggestion attributed above to a "wag," the child in the basket on the Sakagawea dollar has a name (Jean-Baptiste Charbonneau) and was in fact a rather historically significant figure in the 19th century West. Guess he doesn't count 'cause he didn't write the Federalist papers.
    And bonus points for any one who can name the first non-symbolic woman to appear on an American dollar!

  15. We need to stick with the paper dollar bill because otherwise I would have to jam an ice pick into my skull after listening to Bill O'reilly ranting on about the Liberal's war against the dollar bill.

  16. Thank you to PocketFullOCoins for saying what needs to be said.
    Generally speaking I only use bills on a daily basis. Whatever change I collect during the day winds up in my car change tray or in a monumental pile on my dresser.
    I can't stand lugging around bits of metal in my pocket.
    So what's the game here? Viva el fanny pack?

  17. >"Contrary to the snotty suggestion attributed above to a "wag," the child in the basket on the Sakagawea dollar has a name…"
    Yes, the Sack O' Gawea suggestion was extremely insensitive. Everybody knows that the "golden dollar" is called a "Squawbuck".

  18. neil asked why not introduce a bigger dollar coin; actually, neil, the dollar coin before the Susan B. Anthony was a substantial sized coin with Dwight Eisenhower on it that no one wanted to carry because it was "too big." Reviewing American views on coins and paper money only emphasizes my nasty suspicion that Europe in the 19th century got rid of all of its village idiots by sending them here.

  19. ALL the presidents? I will not accept a coin with George W. Bush's face on it. (Perhaps getting his face on a coin was the purpose of the design selection, as they knew that they couldn't get away with using his face alone.) Couldn't they make an exception for presidents who torture?

  20. I think the answer to the "what's wrong with bills" question really does go back to the vending machines. As inflation pushes so many vending machine products over a dollar, it's more convenient to put in a coin (if you've had that unfortunate experience of putting in the same bill over and over, or having it rejected). I think the most sensible point would be to get rid of the penny altogether. But then again, people are starting to move to using plastic for even the most "micro" transactions. One could foresee a time when this whole debate is simply anchronistic and you pay with your thumbprint or the chip embedded in your head.

  21. Henry: Only up through Nixon. U.S. Law forbids putting the likeness of a living person on a coin. So technically Reagan is eligible. I guess they're waiting until Ford and Carter die, so they can issue them in the right order.

  22. PocketFullOCoins, to answer your (possibly rhetorical) question, 50-cent bill is a bad idea because it's probably larger and only slightly lighter than five dimes.
    For typical transactions, a $1 bill is more convenient than a coin, but vending machines and parking meters are two big exceptions. Parking at a meter in Vancouver, one quickly starts to appreciate the Loonie ($3/hour from 9AM to 8PM every day).
    And yes, they will have two (nonconsecutive) Grover Cleveland coins.

  23. > neil asked why not introduce a bigger dollar coin; actually, neil, the dollar coin before the Susan B. Anthony was a substantial sized coin with Dwight Eisenhower on it that no one wanted to carry because it was "too big."
    While I'm opposed to coinage on principal (see above) I do like the idea of differentiating by thickness. Think something the diameter of a quarter (perhaps slightly smaller) and 150-200% the thickness of a nickle.
    I suppose the vending companies wouldn't be too wild about that, though, either.
    > And yes, they will have two (nonconsecutive) Grover Cleveland coins.
    These mining interests really are quite insidious.

  24. Sign me up, too, with PocketFullOCoins, but the UK experience perhaps does not apply completely because for some reason, I suppose, their penny is huge.
    Still, if getting rid of the paper one dollar bill is the goal, do that first, minting lots of 50 cent pieces. People will start clamoring for a dollar coin, and make the vending machines take the 50 cent pieces.
    You know, we used to have dollar coins. They were called "silver dollars" and the casinos kept them alive for years for the slots. Why can't we just start minting those again, but sandwich them like quarters instead of making them of silver?
    Their heft made them easily distinguishable from lesser coins. I think part of the problem with all dollar coins since is that, dime aside, we instictively think a dollar should be bigger than any other coin.

  25. > One would have to also pass legislation requiring vending machines to take the dollar coins.
    Most if not all soda machines already do, even when they don't explicitly state it.

  26. > Most if not all soda machines already do, even when they don't explicitly state it.
    That is, they take the current dollar coins, which are easily mistaken for quarters… as opposed to some brilliant future design that is easily distinguishable from them.

  27. "Generally speaking I only use bills on a daily basis. Whatever change I collect during the day winds up in my car change tray or in a monumental pile on my dresser.
    I can't stand lugging around bits of metal in my pocket."
    Thats because every coin except the quarter is not even worth carying around. I'd like to see dime as the smallest coin, and 1 & 2 dollar coins minted. You're more likely to spend a coin if you can actually get something for it.

  28. I don't get it, where do those of who you who wear pants and don't carry a purse or anything keep all these coins? Maybe I'm just slightly OCD about this kind of thing, but carrying nine or ten dollar-size coins in my pocket is awkward and annoying. And when I grab my wallet on the way out of the house, I don't routinely also look for a pile of coins to carry around with me; but that's what you'd have to do if we had only dollar coins. Why is that preferable again?

  29. I think the answer to the “what’s wrong with bills” question really does go back to the vending machines. As inflation pushes so many vending machine products over a dollar, it’s more convenient to put in a coin (if you’ve had that unfortunate experience of putting in the same bill over and over, or having it rejected). I think the most sensible point would be to get rid of the penny altogether. But then again, people are starting to move to using plastic for even the most “micro” transactions. One could foresee a time when this whole debate is simply anchronistic and you pay with your thumbprint or the chip embedded in your head.

  30. I don't really want a pocket full of coins either, but if you think it's a problem to carry 9 or 10 dollar coins in your pocket, is it also a problem to carry 40 quarters? Not really, because you wouldn't do that. The dollar today is worth the same as a quarter from N years ago. The quarter worked back then because you'd quickly drop them in a jar or "color up" to bills if you had too many. The same could work with dollar coins and higher value bills.
    I like the idea above of dumping the penny and replacing its spot with the dollar coin, and dumping the dollar bill and replacing its spot with the two dollar bill.

  31. We had silver dollars eons ago. Worked fine. Used by many. Looked nothing like a quarter, as far as size.
    And that's the prob. Vending machines are stuck in the Susan B. Sacagawea loop. Until you start from scratch, we'll remain stuck.

  32. If paper bills cost the Mint so much, why not replace them with more difficult to forge and longer lasting plastic bills?
    In the absence of this step, I find the arguments provided by the Mint pretty damn lame.
    I'm with MY — this is about nothing but mining interests.

  33. The Susan B. Anthony dollar made numismatic history: it is the first coin with an eagle on BOTH sides (snerk!).

  34. I wish they'd make dollar coins that are the size and weight of britain's pound coins. they *feel* like a dollar — maybe the diameter of a nickel or a bit more, but thicker and more dense. they're easily recognizable to the touch in a pocket full of other coins. love 'em.

  35. I'm with the folks who think we should get rid of the penny, and the nickel. Both are worth more as metal than as currency – see http://coinflation.com/ – and both are relatively useless.
    We should have a dollar coin with Lincoln and a $2 coin with Jefferson (making up for eliminating the penny and nickel), drop the $1 and $2 bill, and put Washington on the $10, dropping Hamilton.

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