The Cashless Society

I send my kids their weekly allowance ($5-$10) to a bank account via PayPal. The bank account links to a debit card which the kids use to make purchases from Amazon and Steam.


Get them selling stuff on Ebay.

Which type of bank account does not eat up the $10 in fees?

If you link your Paypal account to a bank account and send money for 'personal' reasons (friends, family) there is no charge from Paypal. They charge fees on credit card transactions.

For now. First bag's free.

Marie is correct. Anyone remember when ATM card transactions were free at any bank within that card's network? This was supposed to cut the costs of employing tellers for the transactions. Now every bank charges a fee for using their ATM with a card from a different bank...

False. Lots of banks reimburse have reciprocal arrangements with other banks for no fees, or they reimburse you directly for any such fees. Ally bank comes to mind, but there are many others.

ATM fees, like so much else in the market right now, have become a shell game. It's true there isn't always a fee. But my memory, also, is that there wasn't ever a fee at the beginning, the ATM was supposed to save the consumer because of the increase in efficiency. This was back in the day when you could cash a check at a bank you weren't a member of, a business courtesy. Which was back in the day when people knew what a check was!

Anyone who uses Ebay as a seller can tell you how it has changed it policies in the last five years or so. Many small vendors have had to step out. There are fees everywhere, and uncertainty as policies change back and forth. There's no reason to believe Paypal won't go a similar route once it solidly owns the market and can afford to tick people off.

I'm imagining Miles Kimball is just sitting in his office, rubbing his hands together, waiting for currency to be fully digital.

What's Steam?

Think of it as the iTunes Store for video games. If you're buying a game for a PC (or Mac) these days, you're almost certainly doing it through Steam. Retail stores now basically only sell console games (and those are going more and more digital as well), Steam has come to totally dominate the market.

Steam is quite large, but in the US at least, stores still sell a lot of PC games. That being said, Steam is a great site with a lot of very nice sales.

When is the last time you walked through a store meaning to look at PC games? I had a few minutes to kill waiting for my wife and decided to wander through Gamestop to see what types of games are played now. Not a single PC game on the shelves. It's been a few years since I've played anything, but PCs were the gold standard. I was surprised that things had changed so drastically.

"When is the last time you walked through a store meaning to look at PC games?"

Best Buy within the last month, it is right across from the Books-a-Million (another dying retailer) and I still like to browse. Now granted I haven't bought a PC game at Best Buy since last year (Civ 5), but I've only bought a single AAA PC game since, X-Com on Steam.

I don't disagree that DVD based (physical) PC games are on their way out. I'm just saying that there are still billions of dollars in physical sales per year, still. That's a non-negligible amount.

The moral is: don't use a little America shopping mall as a global thermometer.

And the winner is PC, look at global gaming sotfware revenues, the trends. I'm curious about the people who declared the PC dead. I think they haven't looked at Asia numbers =)

Axa, no one was saying that PC games are dying. The argument was whether physical PC Game sales from a brick and mortar store were dead. I countered with the Their Not Dead Yet argument.

I wasn't able to find any percentage splits between hard and soft copies of games being sold. Apparently Steam doesn't disclose number of copies sold. I strongly suspect that online distribution far exceeds physical store. Other than collector's editions, I don't see the benefit of having a physical disk.

The last game I bought was off of GOG.

According to the Entertainment Software Association (pg 11) physical format was 69% of the US market in 2011. So as of the end of 2011, digital sales were less than 1/3rd of the market.

When it comes to computer games 2011 may as well be ENIAC. I doubt I had even heard of steam in 2011.

Page 11 shows is total games, not just PC. PC games are a small fraction of total games sold. I'm not surprised that there is still a strong market for hard copies of console games, given that's what I see on shelves. I'm not sure that that would hold true for PC games.

I was surprised at the difference between the dollar sales growth and the recent digital and physical sales info graphs.

I want cheaper prices on kindle books, assuming there are parallels.

"Page 11 shows is total games, not just PC. PC games are a small fraction of total games sold."

Your right! And I didn't see any other source that really broke things down clearly. But I think we can agree, that whatever the current state of PC games, they are most likely going to be a primarily digital format in the future.

No one sells PC games any more, maybe there are some mom-and-pop type specialty stores somewhere but now it's all console games. PC games have basically become a niche.

See JWatts comment for total ownage.

No True Scotsman plays games on a PC.

Speaking of iTunes, an iTunes account can set up a recurring transfer, for example $10 on the first of each month, to another iTunes account. The transfer can be revoked or modified at any time.

"Almost certainly" is a bit hyperbolic And do they really dominate?. I'm not sure Steam even picks up a majority of major PC game releases through its service. A lot of big game companies have set up their own services and don't deal through Valve. But Steam is great. They likely "dominate" the independent game category.

The video-game client / library owned by Valve Corporation

Just wait till you find some smut in the mail that you never remember having ordered. :) I know, mailed smut is sooo passé.

What do they do for cash when they want an ice cream?

McDonalds will sell you a $1 ice cream cone with a debit card, no worries.

A lot of vendors now take credit/debit cards on their smart phones. These Cube readers are basically free to get. They make their money out of the 2.75% fee per transaction.

Alex needs to teach his children that them using a card costs the vendor more money than them using cash.

It costs us all money when card usage is widespread, because the retailers pass the increased cost on to everyone in the market.

For small vendors, even distributing the cost out isn't always a solution. A friend owns a small mom and pop in an isolated area, lots of small exchanges, under $5, but they have to pay a set fee per exchange, so it really hurts their margin. If they try to make up for the loss with increased prices, that huge relative percentage makes their costs too high and reduces purchases. No getting around it, though, consumer expectation makes it impossible to operate a retail business without taking cards.

Oh well, I live and learn. Having seen how slow queues were in NZ when every teenager insisted on paying electronically, I had assumed that other countries might learn a lesson on the virtues of cash.

Not sure that cash transactions are either faster or less expensive than electronic. There are significant expenses to handling cash, including employee theft.

> It costs us all money when card usage is widespread, because the retailers pass the increased cost on to
> everyone in the market.

This isn't really true. Card costs are a transfer from people who pay cash and use debit to people who use Amex. It's a discount for higher-end customers built around the assumption that they are less price sensitive and generally better customers to have.

Seriously? I didn't want to know that. . . . .

That's why you pay more for Amex, and cash is "free," minus the hard to observe handling costs Cliff refers to.

The idea is that retailers inflate the price for everyone, but then the card providers get a cut that varies depending on the worth of the customer they are providing. Better customers warrant a better cut. Most of that cut is passed on to the customers themselves. Amex rewards are basically a mechanism for retailers to pass on a discount to the kind of customer they'd prefer to have (this is why most of the objection to high fees stems from places like gas stations and low-end retailers who don't really care about whether you make minimum wage or collect Porsches). The higher price built into cash purchases is because the kind of person who pays in cash is the kind of customer you don't care so much about having, mostly because they are poor. The same is true of debit, and to a lesser extent low-end cards like Discover.

Pay them their allowance in Bitcoin and save on fees.

A currency that is mainly used for illicit purchases and speculation is ideal for kids' allowances!

When your kids can buy pot with a smartphone and bitcoins, we'll know the new age has arrived!

Since when 47 in screens are illicit?

Forgot the link

What--you didn't give them Bitcoins? Gold?

You issued them EBay Script!

Paypall, not Ebay, script. Although, if they start selling your or their possessions, I supposed EBay could offer script.

I believe Ebay now owns Paypal, and there's some thinking that Paypal is the only thing keeping it afloat these days.

Alex will learn how inconvient his choices are when Paypal sucks money out of his account because his children return something.

I don't understand how his children returning something that was charged to a debit card of theirs will affect "his account"? He transfers money to their debit card.

Do you mean "scrip," by any chance? Though "script" is more intriguing.

Yes, and I will reward you with one Bill scrip, redeemable at all Bill stores.

"You wash 16 dishes, what do you get? Another day older and deeper in debt." - Bill's children

I think you may be offering your kids below market rates for their allowances.

Here is the average weekly allowance by age:

Age and Average Allowance
4 $2.85
5 $3.15
6 $3.85
7 $4.10
8 $4.32
9 $5.52
10 $7.18
11 $7.92
12 $9.58
13 $9.52
14 $13.47
15 $15.57
16 $17.84
17 $30.66
18 $40.10

Here's the link:

I think your kids may need a union if they are underpaid. Or, if you are overpaying, you might want to show them this, and reduce the allowance, because you do not want to leave money on the table. Hard lesson to learn about markets.

Clearly, kids need to be able to participate in a parent market, where they can freely choose which parent to be a child to in order to set a fair market price for allowances and other parental policies. "Sorry, mom and dad, but the Gundersons are offering $15 dollars a week, a 10 pm bed time and ice-cream every Wednesday and Saturday. I can't afford not to be their child!"

C'mon man, we all know that looking exclusively at cash (or non-cash, as the case may be) compensation is far too simplistic. That doesn't account for non-monetary compensation, such as education, healthcare, and stock incentives (i.e. Professor Tabarrok's will).

What do you imagine the expected value is of taking a paycut now so dad can reallocate it to some bullshit ta...errr, investments?

Doesn't this then raise the question, Are Alex's kids sticky?

Their stickyness depends on recent debit-card McDonalds ice-cream purchases

allowances are theft.

Notice also that he said "allowance" without tying it to any performance by the kid. If so, he is creating a familial welfare entitlement, making his kids "welfare" queens and welfare dependents.

'zero marginal product workers'

No kid over 14 should get an allowance. Get a job!

Good luck finding a job at 15.

I had two. Seriously, mow lawns, bag groceries, referee kids soccer.

Perhaps his kids have been outsourced; cost of living is cheaper in India and $5 will go farther.

Allowances alone are not a good estimation of children compensation. Imagine a 10 year old with a $10 a month allowance, but whose father's monthly expenses included $300 in videogames, $100 in comic books and a Netflix subscription. Said father buys whatever he likes with the money. If the kid shares his tastes at all with his father, it seems to be that he'll be far better off than a kid with a $30 a month allowance, but whose father spends all disposable income in golf and hookers. He can just wait for 'the state' to provide the goods he wants to all household members, and use his smaller allowance for specialty items that the father has no interest in.

Once again, proof that there's no decision more important than choosing your parents wisely.

Interbank transfers should be free.

Swiss Cake rolls should be free too.

And calorie free while we are at it.

And Swiss.

That is a sad fact.

Ah, cashless society. So refined, so convenient, works so well....until someone trips over the power cord and it all comes crashing down. Cash works when the lights are out, the power lines are down and the windmills aren't spinning. But to be fair, cash is anonymous at least in the specifics of the transaction.

In small amounts over short durations, I guess. Not for any thing substantial. The banks are all cashless accounting, so we'd better get those windmills up and running again anyway.

$10 per week?


Why does our society allow people who can only afford (or are only willing to give) $10 per week per child to procreate?

It's not like he's asking his kids to eat, clothe and educate themselves on that budget, you know.

There should be a federal minimum allowance, indexed to the CPI.

Nice try kids but I am on to you and watch your language!

Thread Winner! :)

As a teen-aged youth thirty-odd years ago, it was much more common then for me to carry fifties or hundreds in my wallet then it is now. Losing tangible representations of money in common use is going to have some effect.

Loss of the pain of paying when you use a credit card; better self control if you use cash. Also, using credit card instruments leads to poorer food choices:

How Credit Card Payments Increase Unhealthy Food Purchases: Visceral Regulation of Vices
Author(s): Manoj Thomas, Kalpesh Kaushik Desai, and Satheeshkumar Seenivasan
Source: Journal of Consumer Research, Vol. 38, No. 1 (June 2011), pp. 126-139
Published by: The University of Chicago Press
Stable URL: .

The question to me is will this hold true across generations? Will children who grow up in a cashless society exhibit an increase in self control when given a tangible representation of money?

This is all kind of irrelevant. Alex is clearly says he's giving them a debit card, not a credit card.

But it's the physical act if handing over the money that matters -- credit card and debit cards both feel less real than physical $.

JWatts, The paper used debit and credit cards, and had the same results regarding impulsive spending. They tested: "1.Both credit cards and debit cards will reduce pain of payment and thus increase purchases of vice products."

Pay for groceries for a month with cash.

Then pay for a month with a debit card.

How many times in each month will you walk out of the store having paid the bill without paying attention to the actual amount you paid?

If you keep your receipts, compare what you bought and the cost for the month on cash and on debit.

You may be unlike me. I would see a drastic difference. But I suspect most Americans (particularly young ones, who don't even know what "balance the checkbook" means) are more like me.

I think you are missing my point. A debit card tied to your bank account with a lot of money in it, is fundamentally different than a debit card that you get $10 once a week in. You can't possibly impulse purchase more than $10 per week. It's no different to the envelope (cash) system of budgeting. You've set your maximum budget before you've made your first purchase. When the envelope is out, you've stopped spending for the week. It's a classic method of budgeting.

I don't really see how it's qualitatively different. If the money isn't spent, it accrues, right? Just like my bank account? It's just a matter of scale?

What am I missing?

Scale and the available balance on hand is critical at the low end. People, on average, spend more money when they have more money available to spend. Alex is explicitly giving his kids $10 per week. How much of that is going to get saved if he switches to cash?

If I give an average person a cash envelope with $2490 in it and send them to the store to buy groceries once a week for the next 20 weeks and I give another person a debit card and load it with $124.50 per week, who is going to spend more money in the first 10 weeks?

I'm guessing that most people with the cash will have spend more than half of it after 10 weeks. Some will have spent less than half, but the median person will have less than $1245 left. Obviously, none of the people who got the debit card will have spent more than half.

I'd be curious to see the affect on $124.50 cash (envelope method) per week vs $124.50 debit card method. I'll accept the premise, that cash might lead to somewhat less spending, but I would expect the result to be minimal over the long haul.

Pay for groceries for a month with cash.

Then pay for a month with a debit card.

Marie, this could be one of those male vs female differences, but have you ever been around a guy (of almost any age) that has for any reason a very large amount of cash in his wallet? Enough cash that the wallet won't really close and it's uncomfortable in the back pocket.

I'll virtually guarantee you that said male will spend more money than he would have were the money credited to his debit card.

O.k., I get it, thanks.

Certainly lump sum vs. monthly payout will have the result you are talking about.

But we are comparing monthly payout in one format vs. monthly payout in a different format, as you note.

Since we are discussing children, we are talking about setting up habits and expectations. So because the volume of income is so low, the actual money saved (or not) by using one method or another will be low. But habits formed will be hard to break when the volume of income increases.

Your example actually dovetails right in with my own (post baby boom trained) habits. The day after payday, if I go to the grocery store I am very likely to leave the store not having any idea how much I just signed off on having taken out of my account. I note it later, but unless I focus my attention I miss it in the moment. At the end of the pay period, I know immediately what I'm paying, because I don't want to cross into insufficient fund land. I either scale back my purchases or transfer from savings if I'm close.

But if I am using cash, it requires me by its nature to always know how much I spent. And if I don't have a card as backup, if I spend more than planned I have the embarrassment of having to return groceries to the shelves once in line. Big deterrent.

Surely there's a huge correlation between awareness of how you are spending your money and wise spending of it. I don't want to lessen that correlation for my kids in their formative stages.


Just read the last reply about wallets and males. I concede on every front! Spot on.

JW, The point is, if you read the article, that you will make different choices with cash v. Card. Including impulsive, whether or not there is a constraint, and that cash also has more pain in spending than a card. So, not only are choices different, but so is spending

"JW, The point is, if you read the article, that you will make different choices with cash v. Card. Including impulsive, whether or not there is a constraint, and that cash also has more pain in spending than a card. So, not only are choices different, but so is spending"

I didn't get that from the article. What I got was there were differences in spending between groups that paid with credit/debit cards and groups that paid in cash. Which is not the same as saying that a particular person would make different choices over the long term if their method of payment changed.

So, JW, what you are saying is that they didn't do a long run, longitudinal study, but only showed changes during the term of the experiment. Hmmm. And, support for your claim...."is fundamentally different than a debit card that you get $10 once a week in. You can’t possibly impulse purchase more than $10 per week. It’s no different to the envelope (cash) system of budgeting. " Well, you backed away from that after you read the article. Good for you. Then you shifted to saying that the study didn't look at long run you have any study you can site that short run behaviour would be different than long run?

That's nothing. I've outsourced my children to India.

The manufacture?

Screw cashless, let the NSA predict what you would purchase had you know what was best for you.

The NSA needs to watch out lest it step on google's turf.

Good. You want to make sure the government starts tracking your kids as soon as possible.

I despise cash and find it shocking when I can't use a credit card these days. Vacations are one thing, where the carrying of cash is a necessity in many places, and I totally understand small vendors of tacos or something in other countries not taking cards, but here at home? I'll take the insurance and systematic accouting of expenses and airline miles or whatever associated with a card purchase thanks.

I recently had an issue with my ATM card when traveling to the UK, planning to withdraw cash in pounds once I got there, and had zero cash on me. I made it the whole trip without any cash at all and without any cards with chips in them.

Dwolla is much cheaper than PayPal for transactions like the one you are referring to. It is actually free for transactions $10 or less and just .25c for anything above. A lot of people I know use it to pay their rent.

Cheaper than free, eh?

The advantage of giving cash allowances is that it forces an interaction. If you autofill the childs debit card, one less reason for them to see you, one less opportunity for you to scold them or whatever. Much easier to get them to do things for you if they have to come begging for their allowance.

Also if they forget to come collect their allowance.. free lunch!

Also, with cash, you can teach delayed gratification. If you give the allowance at 9pm at night, the child dosn't have the opportunity to run out to buy a gift card to turn the cash into something they can use online. They then have to literally sleep on it, and when they wake up, they may change their mind and save for something better.

You can also have them buy their own treats at the supermarket instead of throwing things into your shopping cart.

You know, if those kids don't get paid on time, they may have to resort to "payroll loans", and we know where that leads.

Sure, you can set your interest rates just below those of the payroll loans, and make (save) tons of money.

What's the advantage of training children to buy primarily or solely online? Video games, fad clothing brands, processed foods, medication, video, small bandwagon-driven toys are easy to buy online. Fresh food, bicycles, puppies, garage sale treasures, clothes that fit your body and personality, the bracelets your friend made at school and is selling at her lemonade stand,and activities (day at the pool) are easier bought off line.

Exactly the opposite of reality. Many healthy foods are easiest to purchase off e.g. Amazon and are not available in most stores. Most high quality products can only reasonably be found online.

Can you give me some examples of that?

I wasn't talking luxury items, I was just noting that you can buy pre-packaged, highly processed, normally carbohydrate rich (because it stores and ships well) products very easily off the internet, but buying fresh produce or meats or dairy is a job best done offline.

I'm not sure how that's contestable. It is true that if you move to shmancy stuff, like grass fed beef or organic specialty fruits, if you can't find it locally (which I've found we usually can) then you can order it online in small quantities and at a high cost. And I know folks who need specialty diets, gluten free or etc., that have particular products they prefer and can't find locally. But as for simply healthy foods, I can't see what you mean.

I take it that this is Alex Tabarrok's method of keeping his children on an extremely short financial leash, with absolutely no unauthorized candy, while being reasonably tolerant about books, music, and games. He doesn't say whether the kids are allowed to carry the debit cards around with them, or only to use them to set up merchant accounts. I presume the latter.

Amazon doesn't like doing small shipments, and their price structure reflects that. Looking on their website, their best offer for Snickers bars is a dozen two-ounce bars for $17.50, with delivery in a week. In terms of five and ten dollar allowances, this is prohibitive. Children live very much in the immediate present, and they are extremely unlikely to plan three to five weeks ahead to get a Snickers bar. Amazon will often sell a used paper book for four or five dollars, of course, because the actual scarcity value of the book is only ten cents.

I'm a non-driver in a place where this is not considered a reasonable life-style choice. This is a place where PeaPod does not operate. In practice, grocery shopping often works out to carrying sixty pounds of groceries home on my back. I do find it convenient to reserve the "porterage" for food good enough to deserve it. Amazon offers reasonable prices on things like canned tuna if you buy a lot of it, say four dozen cans. This applies with even more force to non-food household stores.

Why the Paypal interaction? I presume your kids "bank" at the same place you do. Can't you just transfer between family accounts using the bank's website?

Or is this a service only offered by credit unions like mine? I can do unlimited free transfers to not only accounts in my immediate family, but easily and free to accounts in my extended family as long as the last name they have on file matches.

There was an interesting story about corporations paying their employees who didn't have bank accounts for direct deposit (or perhaps simply were not at a certain level of pay) via prepaid cards. The problem was that the employees were then facing significant transaction fees just to access their pay.

Ultimately I do think we'll get to some cashless economy, though suspect there will always be some non-trackable currency in use for various transactions, but have some concerns that the immediate path will shift the cost of pay directly on to the employees while I see those to be legitimately the costs employers should incur, not shift.

It's really generous of you to make certain that corporations and the government and you can directly observe every penny your children spend.

You and your family should check out Tykoon. It's still in private beta but getting an invite shouldn't be too hard for an Internet celeb such as yourself.

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