It costs more than a penny to make a penny, so should we get rid of them? It depends. How many times will a penny get used in it's lifetime? A penny is seldom used once. It's value in use is better determined by the value it adds to facilitating transactions. If people would not agree to a transaction if one or the other sides has to round up to dimes, then the loss of those transactions is real (but small).
But pennies are time consuming. Ever been behind someone in line trying to pay with pennies? Most of us don't bring pennies into a transaction, we leave with them. And put them in a jar. Then we bring them to the bank or give them away. Pennies are the ultimate hoarded money. If the gains from transactions which would not occur without pennies are greater than the transactions costs which pennies impose, then we should keep them. Otherwise, let them go -- nickels, too.
Indeed, if we were to overhaul our current coinage, it might make sense to start over with just dimes, half dollars, dollars, and five dollar pieces. Of course, the dollar pieces need not be as big as silver dollars. We could re-purpose the smaller sizes. These are just tokens, after all. I can imagine an increase in coin usage if the coins were more practically denominated. The real reason there are inefficiencies in the provision of coinage today is that there is no competition in that provision. Who knows what coinage might emerge under a free banking system?
Perhaps the answer is ditching coinage altogether -- this of course, is just one of the value propositions of bitcoin and other crypto currencies in general.
