econlife - Is it Okay to Go Cashless During a Pandemic? by Elaine Schwartz

In 1978, Massachusetts became the first and only state to ban cashless transactions in retail establishments. Then, 41 years later, New Jersey, Connecticut, and Rhode Island, followed its lead.

After that, the cashless bans multiplied. Including Philadelphia, San Francisco, Berkeley, and NYC (on Nov. 20), a growing list of U.S. cities are saying that plastic alone or just digitized payments are not okay. Cash has to be acceptable.

However, the pandemic is creating some questions.

The Cashless Debate

When the U.S. government got a delivery of Federal Reserve notes from Asia, it said circulation would be delayed for at least 7 to 10 days. They wanted to be sure no virus lurked on any surface. Similarly, referring to Covid-19, a Rhode Island college professor suggests that her state reverse its cashless ban. She cites the governor’s recommendation that all restaurants become cashless when they reopen. Perhaps knowing that a typical rectangle of “paper” money can be the home of 3,000 kinds of bacteria (though I’m not sure about the coronavirus), both believe no cash is a healthier alternative.

Also opposing the cashless bans, opponents say they stifle payment innovation. Others point out that cash adds to business minutiae. They have to count bills, deposit them, maintain safety precautions. Atlanta’s Mercedes Benz Stadium saved $350,000 after going cashless during March 2019. Meanwhile, Harvard economist Ken Rogoff adds that large bills contribute to global crime.

On the other side, the cashless bans diminish inequality. They support the fifth of all Americans who have no bank accounts. They help the people and small businesses with limited internet access. In addition, psychologists remind us that cash can be a restraint. When we are aware of the cash we remove from a wallet, we spend less.

Cashless Transactions

Moving beyond the U.S., we can travel to Canada to see a more cashless country. Sweden also is high on the list. (Several years ago I told the wonderful story of an aspiring bank robber who was told he had selected a cash-free location. Sadly leaving with nothing, he asked a teller, “Where else can I go?”)

In the U.K. the share of cashless sellers jumped to almost 60 percent during the pandemic:

Our Bottom Line: Pandemic Money

So yes, the pandemic has encouraged us to replace cash with digital payments. But we should note that our digital device is not necessarily money; the transaction could be followed by a money transfer.

To be money, a payment needs these characteristics:

1. A medium of exchange (It is widely accepted for payment.)

2. A measure of value (People know what a certain denomination will buy.)

3. A store of value (It will retain its value.)

Returning to where we began, is it okay to go cashless during (and after) a pandemic? I suggest yes, if only for the time and money savings that might support struggling retailers. However, as we inexorably move toward a cashless society, we need to knock down its exclusionary barriers.

My sources and more: This NY Times column on cashless transactions took me to countless possibilities.  I went to a National Law Review article, to Payments Source, Pew, and Politico. I also looked at this paper from Harvard economist Ken Rogoff, the Dirty Money project and fisglobal. In addition, the Providence Journal told of the governor’s reversal. But if you just read one article, do go to Bloomberg CityLab.

Please note a key factual correction since publication about the Rhode Island governor’s policy reversal, supporting cashless businesses.

Check out this program, A World of Money from izzit.org that talks about the history of money, in its many forms.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why Driving is Safer in Sweden by Elaine Schwartz

An economist might say that the optimal number of traffic fatalities depends on the cost of preventing them. Sweden disagrees.

Compared to most other countries, Sweden’s road safety is tops:



In the European Union, Sweden and Norway have the low numbers while Bulgaria and Romania (dark blue) have the most road deaths per million:

The Swedish Safety Solution

Through a “Vision Zero” strategy, Sweden is aiming for no traffic fatalities. So far, they’ve been able to almost halve the number of road-related deaths from 541 to 270 between 1996 and 2017. Why? Because Swedish traffic authorities focused on traffic laws and infrastructure instead of the drivers, walkers, and bikers.

Many of Sweden’s roads have new safety features. The wider arteries that installed guard rails between oncoming traffic diminished deaths by 80%. Their use of the 2+1 road boosted safety by having one direction-switching lane that permits passing. In addition, Sweden built more roundabouts and rotaries because they reduce how fast people drive and eliminate the hazard of left turn accidents.

But it’s about more than the flow of traffic. In places with bikers and other unprotected road users, top speed limits are 30 kilometers an hour (18.6 mph). At so low a speed, people struck by vehicles have less than a 10% chance of dying. In 50 kilometer zones, the percent rises to more than 80. On long stretches of country roads safety cameras are supposed to “nudge” people to drive more slowly rather than nab speeders.

Smiling, I can say this is what Sweden’s traffic planners avoid:

Our Bottom Line: The Cost of Road Safety

Below you can see that the Americas have 15.9 road-related fatalities per 100,000 population. In Africa that number soars to 26.6 per 100,000.




As economists we have a mindset that asks the cost of eliminating those deaths. Thinking at the margin (as we might also for diminishing air pollution), we can compare two numbers. We can ask the extra cost and the extra benefit for every life saved. And, when cost exceeds benefit, our life-saving initiative stops.

Sweden disagrees.

My sources and more: In WSJ, in Quartz, and at City Lab,  Sweden was the perfect traffic safety starting point. A much more recent WEF discussion confirms what those 2014 articles say.

Our featured image is a roundabout visualization of a Texas I-35 improvement plan.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

New Release: "Power to the Planet"

We need energy for many things, including lighting, cooking , transporting, heating & cooling....But which energy source is the best? What are the trade-offs of each?

Pollution needs to be considered, as well as availability. What else should we factor in as we decide what's best? Is there even such a thing as "the one best source?"

Travel the globe with scholar Johan Norberg, from Morocco to Sweden and throughout the United States, as he explores the pros and cons of the eight main energy sources available to us: coal, oil, natural gas, nuclear, hydroelectric, biomass, wind and solar.




Click here to find out more about this teaching unit.