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Comment by kakooljay | Hacker News Reader

Interesting post (I love Steven Levitt) but there's a great lesson for developers here: Efficiency is only one consideration. What about usability? Do you really want to wait in line at McDonald's or Starbucks while someone (maybe a high school dropout) counts on his fingers to make change in 71 & 37 cent coins? The overhead here (an extra coin in your pocket) is well worth the added convenience. Aggregated over the whole economy, those extra seconds would literally be worth billions of dollars a year..

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How about a lesson for lateral thinking? I'd still prefer to do without the coins and go for a all-virtual, all-plastic system. Efficiency and Usability.

For that matter why not do away with the card as well and use some sort of biometric technology to tie into your bank account?

I think that this highlights an interesting parody. To get increased efficiency you need to buy more expensive equipment. A cash register full of bills and coins doesn't cost much and after the initial investment you are pretty much done except for the expense of receipt paper.

However, credit cards require more complex card readers, systems to tie the card into central servers, etc.

In turn biometrics would require even more: pupil scanners, etc.

So the drive for efficiency and usability would appear to lead to even more complex devices, rather than the simple usability of handing a metal disk from one person to another person.

Where do you want the complexity -- one time, upfront, or during every single transaction?

The existence of Hacker News requires a whole lot of complicated technology. Having this conversation via smoke signal requires a much smaller investment. And yet...

Clearly without a study it would be impossible to determine whether the upfront complexity of designing and installing specialized credit card equipment would be more or less than the comparatively small complexity of counting out coins.

Walmart, for instance, now uses a system that dispenses the coin change automatically so that the person at the cash register doesn't even have to do it themselves.

There are three types of security verifications:

  What you know
  What you have
  What you are

Of the three, what you know is by far the most secure (in theory). What you are is the least secure.

What you know can never be stolen from you, at least not without you being aware of it. What you have is hard to steal, but not impossible. What you are is trivial to steal.

Biometrics is the least secure method of verifying someone. It is trivial to clone, and even worse you can clone it at a distance without the person even realizing it was cloned.

So no, biometric tech is not a good way to paying someone.

However, what you know is subject to people forgetting, and it's hard to have a very long pass phrase.

What you have wins easily. And the real world bears this out - every security system everywhere uses it, credit cards, keys, drivers licenses.

Computers use what you know only because it's hard to do 'what you have' remotely.

I don't like biometric ID because once someone steals it, you can't be issued a new one!

Body-tagging as a means of identification for payment is an old idea, almost 2000 years old at least, perhaps longer ...

From the New Testament, Revelations, chapter 13: "Then I saw another beast, coming out of the earth ... He exercised all the authority of the first beast on his behalf ... He also forced everyone, small and great, rich and poor, free and slave, to receive a mark on his right hand or on his forehead, so that no one could buy or sell unless he had the mark, which is the name of the beast or the number of his name."

Equipment and I.T. systems to enforce biometric/body-tagging systems are costly, but then coins are costly too, and are subject to counterfeiting.

The ultimate rationale for a plasticless, cashless system though will be less in transaction costs than in control and elimination of counterfeit currency, money-laundering, payment in currency for corporate and political corruption. In such a system all money flows are visible to someone at some level, and corrupt transactions will become for-barter only. Of course, the central overseeing authority will become corrupt, which the Revelations passage hints at.

Dropping hard currency raises the bar to entry and kills a lot of low end business. No more street vendors, cash only local business, friendly card games or bets, informal services, or convenient tips. It would also give the plastic channel immense power over businesses. You might not use cash very often, but dropping it altogether would not be a good idea.

Additionally, I like to pay with cash when I don't want my purchasing habits to be collected by the store or my creditor. I find it disturbing how our modern economy makes the task of collecting information on one's interests and identity so effortless. I wouldn't want it to become all the easier.

The plastic equivalent of cash would not necessarily have your personal information attached to it. Think of it like a prepaid phone. You could go to a Post Office and buy (using your credit card or check) a card with a predetermined value.

You could go to a post office and buy, in a transaction which is linked to you, a uniquely identifiable card with a predetermined value?

Yes. You could then show that the person has "bought cash", but not what was bought with it.

How is it different from a $100 gift card from any store?

A gift card also lets the store track your purchases (unless of course you give it away).

The anonymity advantage of cash is that it cycles through the register in a non-deterministic manner. If I buy a $20 bill (serial number 123) from an ATM, and it later winds up at PotMart, that is not compelling evidence I went to PotMart. If I bought a prepaid cash card and it was spent at PotMart, that indicates with decent probability that I purchased some weed.

It would be easy enough to identify regular customers when they in their home town. These days it isn't all that difficult to pair someone's spending habits with their location an do a bit of online research to find out who they are.

If one was careful about it they could probably stay relatively anonymous though.

I have serious doubt about "killing a lot of low end business". I'd imagine that we'd start seeing lots of alternate, local currencies. Card games and bets would probably have other medium of exchange (poker chips) or in-kind value (a 12-pack of beer).

Probably. Hell, we could all just start using Euros (or whatever) for cash, and then exchange our Euros for plastic-only US dollars at changing booths (which would suddenly become a lot more common).

This, of course, doesn't make life any easier for anyone, except the jerks who already use cards for everything (aka the jerks I always get stuck behind in line while I wait for their little receipt to print and get signed).

You want to stop using hard currency so that you can use a different hard currency? Additionally, the Fed(s) aren't fond of competing currencies.

The overhead for taking credit cards in a small business is huge. A small bookstore owner I knew said the card processing fees were more per month than the rent or utilities.

Hey now. I'm a highschool dropout / game developer.

Just speaking rhetorically.. don't mean to generalize. I'm sure Bill Gates would have dropped out sooner (in high school, instead of college) if opportunity came knocking sooner.. You're obviously an exception & probably dropped out for good reasons :)

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