February 19, 2007
The Cashless Society Posted by John Steele Gordon at 05:20 PM EST Many inventions that seemed destined to be with us forever are disappearing into museums, thanks to the digital technology that has already greatly changed the quotidian world and will change it beyond imagination in the next 50 years. I wrote about the incandescent light bulb the other day. The Economist this week has a cover article on a vanishing technology far older than the light bulb: money. Well, not money exactly, just the stuff we have thought of as money for more than 2,500 years. In reality, coins mostly disappeared from circulation over 40 years ago. A coin, by definition, is made of metal whose value is a substantial percentage of the coin’s face value. But the rising price of silver in the 1960s forced the United States to switch over to base metal. What fills up coffee cans in millions of households today is tokens, something of little intrinsic value that is, nonetheless, accepted in payment. Paper money, of course, has always been essentially tokens. Beginning in the 1950s, plastic money—charge cards, credit cards, and later debit cards—began to replace paper money and checks. In recent years, thanks to the Internet, more and more people have been paying their bills online, making checks far rarer. Twenty years ago, I wrote a couple of dozen checks a month, and got cash from the bank maybe twice a week. Today I write no more than one or two checks a month and hit an ATM about as often. Now, as The Economist explains, we are going one step further. It is becoming increasingly possible to simply pass your cell phone by a terminal and—voila!—you’ve paid, whether it’s for the tabloid newspaper you bought to read on the subway or, at least theoretically, the new Ferrari you bought with your zillion-dollar Wall Street bonus. (I hasten to add that I haven’t the foggiest idea how this works.) Therefore it seems likely that in 20 years or so, for the first time since the Persians were gearing up to take over Greece, money will be nothing more than submicroscopic ones and zeroes in the bowels of computers located anywhere on the globe. It will have no physical existence at all.
The winners in this profound transformation will be commerce in general (money is an economic catalyst, and the easier it makes effecting transactions, the more transactions there will be, and the more wealth will be created), statisticians, and the IRS. Losers will be anyone in a traditionally cash-based business—low-end restaurants, newsstands, waiters, barbers, heroin dealers, etc. Also losers will be check-printing companies, bank tellers and bank robbers, Brinks truck drivers, and street muggers. Prostitutes, I’m reliably informed, will not be seriously affected; apparently they’ve been taking plastic for years.
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