Do we really need pennies?

The Canadian government doesn’t think so. By the fall, it plans to stop minting them and stop distributing them through banks. It won’t actually ban them, though. Some people have grown so attached to pennies — a penny saved is a penny earned, after all — that they may want to keep using them indefinitely, and they can, the Canadian government says.

But those who can bear to part with their pennies are being encouraged to bring them to banks for eventual melting or to donate them to charities — which will presumably bring them in for melting. Electronic transactions will continue to include cents, while retail sales will be rounded up or down.

Inflation is sometimes cited as a threat whenever small coins are phased out. A $2.01 cup of coffee should be rounded down to $2, while $2.03 should become $2.05, for example, but retailers in the real world might raise prices more than lower them. That could cause a small, one-time inflation burst, says François Velde, an expert on the history of small change.

“But in a competitive market, you might well see price decreases,” says Mr. Velde, a senior economist at the Federal Reserve Bank of Chicago who is working this year at the Bank of France. “In a place like New York, a 99-cent price of pizza might go down to 95 cents rather than $1 to avoid crossing that higher price threshold.” Over all and over time, there should be no net price effect, he says.

He finds the argument for phasing out the penny to be at least as strong in the United States as in Canada because the two nations’ small coins, political history and socioeconomic culture have so much in common. “That’s what makes the Canadian decision a little unsettling,” he says. “Their pennies even look a lot like ours.”