Oh, I love economics. Sure, it’s called the dismal science for a reason. And yes, math majors deride us for being essentially a four year “Math for Dummies” course, and everyone else just thinks we’re boring. But economics is the ultimate smart-aleck major, designed specifically, I think, to annoy your friends. Wondering why frat boys have a lot of, well, platonic touching and slapping? Assume it’s a non-repeatable zero-sum game, and you’ll find you have a Nash equilibrium*. Wondering how much money going to grad school will get you? Take opportunity cost into account, and you might think differently about getting
that PhD.
And, of course, economics can make you money. Not in the traditional way of course. Many of my fellow majors somehow think their intimate knowledge of IS-LM equilibrium models is going to net them a high salary after school. Uh, no. But economics can make you money in much subtler ways.
Take, for example, the penny. This article in today’s New York Times spells the situation out quite well. Because of rising demand (and therefore prices) of zinc (they’ve doubled in the past year), a penny now costs 1.4 cents to make. Now, the metal in one penny is only worth .8 cents — the rest comes from the printing cost. But it’s totally feasible, and even likely, since the demand for zinc will probably only rise and I don’t know how many more new mines they can find, that the price of zinc will go up and continue to rise. Let’s assume the price of zinc doubles, so each penny has 1.6 cents of metals in it. You have $1,000 worth of pennies and you sell them and melt them down — you’ve just made $600, bra. A 60% return on an investment, especially within a year, is pretty darn amazing. You’re not going to get something like that in the stock market.
Sounds too good to be true, don’t it? Well, the situation’s already happened. According to my good friend Wikipedia, the U.S. government stopped making copper pennies in 1982 because of rising copper prices (you can hear it from the cow’s mouth, if you want). Now, copper prices haven’t risen that much since then, but a pre-1982 penny is worth 1.75 cents. 75% returns, people. So you should go out and horde pennies before the U.S. switches penny metals again, probably to steel like they did in World War II.
Now, I know you’re probably thinking, “Well, gee, Adam, this sounds too good to be true! Are there any downsides?” Well, not really. Pennies will likely remain legal tender, so you won’t lose your money. If they’re ever phased out, the government will probably offer a grace period to convert them back to cold hard cash. Assuming zinc prices don’t increase, the only lost money would be in the form of the opportunity cost of holding the pennies (since you could have invested that money somewhere) and rising inflation. IE, not much. So even in the worst case scenario, you don’t lose much money.
So what are you waiting for, people? Go convert $10,000 to pennies at the nearest bank! It’s the best investment you can make, I imagine. And you can thank me when you’re rich. You know, by, like, giving me money or something.
- Adam Rodman
Money Guru
* Mind you, it’s not EXACTLY a zero-sum game — there can be some collaboration — and more importantly, it is repeatable, but it’s a useful abstraction. Just ask me for, uh, elaboration on my theory and I’ll be glad to talk about it!