In colonial North America there were two currencies: coins of precious metal and wampum. I would have guessed that a more advanced society would have simpler and more efficient payment and exchange systems, but it doesn’t seem to have worked that way. Let’s look at a person who travels for business up and down the East Coast. He or she will need the following:

traditional U.S. cash, the only acceptable form of payment in many small businesses

a credit card, the only acceptable form of payment for many things, e.g., rental cars, airline food and entertainment

a cash-equivalent card for paying for subway rides on Boston’s MBTA (they spent so much putting in the electronic fare machines that they had to raise the price of a ride from $1.25 to $2, but the new system cannot take a credit or debit card directly)

a cash-equivalent card for riding the New York City subway and buses

a smarter cash-equivalent card for riding the Washington, D.C. subway (charges a variable fare depending on distance and time of day)

various cash-equivalent cards that pay for parking meters in more advanced towns

an EZ-Pass for paying car tolls in the Northeast (this and other RFID-based toll collection systems are currently optional, as our business traveler could elect to wait in line and pay with cash, but proposals are on the table for making them mandatory (toll collectors can earn more than $150,000 per year, including the value of pension obligations, so there is some pressure to eliminate their jobs)

an E-PASS for paying car tolls in Orlando

probably a few more electronic toll payment systems for the states in between

Can anyone think of some more? Is this proliferation of currency hurting U.S. economic efficiency?

[The New York Times yesterday ran a story about running nearly $1 trillion in taxpayer money around in circles through AIG, Fannie Mae, Freddie Mac, and GMAC. I wonder if we’re doing the same thing on an individual basis, i.e., running our money around in circles through various cash-like payment schemes, each time losing about 5 percent.]