size of the coins compared with the discs.
Masses of studies followed, confirming that all over the world, adults as well as children overestimate the physical size of money, regardless of the currency. And, as we’ve already heard in Chapter 1, people prompted to think about death are even more prone to this perceptual exaggeration. Not only that, but the size of the effect depends on whether or not the participants in studies are rich or poor. For example, the 1947 researchers tried out their experiment both with children in a settlement house in one of Boston’s slums and with pupils at a school in a well-to-do area. The children living in poverty overestimated the size of the coins more than their wealthier counterparts. Echoing findings I’ll discuss later in Chapter 10, their lack of money, and therefore the precious quality they attributed to it, skewed their perceptions that bit more.
MONOPOLY MONEY, THE ACCORDION EFFECT AND WHY BEING GRUMPY LIKE JEAN-MARIE LE PEN CAN BE USEFUL
In April 1983, Britain began the changeover from the £1 note to the £1 coin. The press was not keen on the idea. ‘The Pound Britain Doesn’t Want’ read a headline in the Daily Mail, dubbing the new gold-coloured pieces ‘toy town coins’.9 The economic value of the coin was exactly the same as the note. The problem was that people didn’t see it that way. They viewed and treated the two forms of £1 (which for a limited period were both in circulation) differently, as the economic psychologist Paul Webley discovered.10
Webley persuaded a group of people to allow him to examine the contents of their wallets every day for a month. He marked every note and coin with one of those invisible detective pens that can only be seen under UV light, before returning every penny to their wallets. This allowed him to track the dwell time that each coin or note spent with its temporary owner before it was passed on to someone else.
At the start of the six-month transition period, during which notes were phased out, people obviously had fewer £1 coins than notes. The new coins were a novelty, and were bright and shiny, and you might think people would be keen – for a while at least – to hang on to them. Indeed, some people in Webley’s experiment did hoard them or put them in piggy banks, but for the most part the coins had shorter dwell times than the notes.
What could Webley conclude from this finding? He had some ideas, but first he wanted further evidence. The problem with his initial experiment was that, with so few coins in circulation, it was hard for Webley’s team to collect enough data. So they tried something else. Members of the university staff were given either a pound coin or a pound note, pre-marked with the special pen, in exchange for completing a questionnaire. When the staff returned the following day for the next part of the experiment, they were asked to reveal the contents of their wallets. Half of the pound notes remained, while most of the pound coins had already been spent.
Paul Webley complains that most economists considered this finding to be of no interest.11 Like him, I think they’re wrong. Even if people were simply disposing of the relatively heavy coins weighing down their pockets, this was presumably having some impact on economic activity at the time. Pounds were being spent more readily because of their change of form.
Of more interest psychologically, the study seemed to show that people considered pounds in coin form as loose change that was more disposable. A pound note by contrast still seemed to represent a more significant sum to be used cautiously. That is surely evidence that the form money takes can change our sense of its value, which if nothing else should make central banks pause whenever they consider replacing one form of currency with another.
In the United States, feelings also ran high when an attempt was made to replace bills with coins. Dollar coins were introduced back in 2007, but the famous greenback dollar bills continued to be produced, and the use of the coins was low. By 2011, with more businesses returning than requesting them, the Federal Reserve Banks found themselves with enough dollar coins to meet the demand for the next 40 years. The Treasury ordered production to cease and now, although ticket machines occasionally spit coins out at you in change, the US is the only G8 leading economic power still using a note of such little value.
But the Dollar Coin Alliance, backed by car wash companies, vending machine firms and snack food sellers, is still campaigning for dollar bills to be replaced by coins.12 Not surprisingly, mining and metals companies support the change too. The Alliance argues that a single coin can last 35 years, 17 times as long as a dollar bill; that coins are 100 per cent recyclable; and that when people complain about the weight of coins in their pockets, they should bear in mind that four quarters weigh three times as much as a single dollar coin. Taking all of this into account, they say, the US government could save $150 million a year if coins replaced bills.13
The Federal Reserve Board argues these savings are exaggerated; that the growth of debit and credit card use renders coins less relevant today than in the 1980s, when many other countries made the transition; that their notes can now last six years due to their superior production; and that coins cost more to produce and are easier to forge.14
So it seems there are strong economic and practical arguments on both sides, but that’s not what interests me. Rather I’m struck by the strength of feeling the debate generates, which is passionate and heartfelt. It’s not just a case of finding the most sensible and sustainable course of action. There are emotional attachments to consider, particularly with regard to the much-loved dollar bill. And for the moment that attachment seems to be winning out. In a Reuters poll, the complete replacement of bills with coins was not at all popular, with three-quarters of people saying they preferred their greenbacks.15
The world’s largest-ever currency changeover, in 2002, saw 12 countries in the EU give up their individual currencies and replace them with the euro. As the change took place the European Central Bank used the slogan ‘the EURO. OUR money’, stressing pan-European solidarity, and after the introduction of the new currency the majority of people polled in the affected countries did say they felt more European as a result.16
Not everyone was happy of course. On the steps of the Paris Opera House, the leader of the French far-right National Front Party, Jean-Marie Le Pen, called for a contemporary Joan of Arc to drive out the Eurocrats. ‘Long live the franc, long live France, long live the French!’ he cried. 17
As a result of the currency change, 9 billion notes and 107 billion coins were withdrawn. The European Central Bank introduced 15 billion new notes and 51 billion new coins.18
Public information campaigns across Europe suggested simple conversion strategies to help people adjust to the new currency. Kits containing one of each of the new coins were bought by 150 million members of the public, to familiarise themselves with the coinage before it could be spent. Products were labelled with dual prices at the start of the three-year transition period. And, in a sign of the times, diskettes were handed out to householders containing information on the changeover.19
After that, it all happened remarkably quickly. Within two weeks of 1 January 2002, euros made up 95 per cent of the currency in circulation. In that first week of the New Year, withdrawals from ATMs were far higher than usual. But curiously robberies from security vans dropped right down. So thieves apart, most Europeans quickly got used to having euros in their pockets. Yet by the end of the first month, only 28 per cent of people said they thought in euros.20
Despite the extensive publicity campaigns to familiarise everyone in the Eurozone with their new currency, people still needed to do mental conversions between the old and new money.
Ireland’s reaction to the euro changeover was among the most positive. 77 per cent of people said they were very or quite happy
