20
$\begingroup$

In the real world — I am from Europe — I often hear and participate in discussions about how printing a paper 2 Euro note would have an impact on micro-economy, i.e. how it would make people less psychologically prone to spend such a hypothetical note instead of the equally-valued real coin.

For reference, Euro currency is as follows:

  • Coins:
    • 0.01 €, 0.02 €, 0.05 € (copper color)
    • 0.10 €, 0.20 €, 0.50 € (golden color)
    • 1 €, 2 € (gold/silver bicolor)
  • Notes: 5 €, 10 €, 20 €, 50 €, 100 €, 200 €, 500 €

So my question is, what is the impact in a constructed world of having a single currency coin (like the standard gold coin often used in RPG video-games), as opposed to more than one type of coin (e.g. the 1 gold = 100 silver = 10k copper coins in D&D), or more realistic setups as described above?

Improve this question
$\endgroup$
1
  • 2
    $\begingroup$ In the US we have had $2 bills forever and nobody cares. Neither is fifty-cent coins used, with no cup in a cash register for them. So what's that anout psychological impact? $\endgroup$
    – JDługosz
    Dec 24, 2015 at 3:54

1 Answer 1

Reset to default
23
$\begingroup$

The effect of having a single coin is that quantities of it will have to be used for any transaction, no matter how large or small. This then has the effect that if it is a high-value coin, how do you use it to buy a low-value item? If it is a low-value coin, how do you carry enough of them to buy a high-value item?

The reason for multiple denominations of currency is to have the best of both worlds, i.e. high granularity (the ability to have small differences in the prices of items) and high portability (the ability to carry a lot of funds easily).

In metallist economies where the value of a coin is tied to the value of the metal it is made from, where a coin of sufficiently low denomination for everyday transactions was not available from the official mint, coin of lower value was frequently manufactured by clipping the existing coins - cutting them in half, quarters or even eighths.

The reason for having fewer denominations is that there is a setup cost involved to the state in having coins minted (making the dies), which increases as more denominations are produced. This may not matter much to some governments, but may be a matter of some importance to others.

Improve this answer
$\endgroup$
3
  • 7
    $\begingroup$ As far as splitting coins goes: That's part of where the term pieces of eight of pirate fame comes from. $\endgroup$
    – Bobson
    Sep 21, 2014 at 19:48
  • 1
    $\begingroup$ The real-life issue some countries are having isn't the setup cost, but rather that due to gradual inflation, increases in wages from cost of living, etc. the cost to mint a low-denomination coin exceeds the value of the coin -- for example, the penny in the US. $\endgroup$
    – Wingman4l7
    Dec 23, 2015 at 23:17
  • 2
    $\begingroup$ The argument that a coin is worth less than it takes to mint is really only valid if the currency can only be used once or very few times. Coins last for years and can be exchanged many thousands of times before becoming unusable or (more likely) lost in the couch. The true issue is if the material making up the currency is worth more than the denomination. Then it becomes better to simply sell the material than to mint the currency. $\endgroup$
    – Michael Richardson
    Mar 15, 2016 at 20:52

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .