Sumner wrong about paper currency

Here he points out that paper cash adds economic value. It is not the paper, it is the private transactions. Smart cards can work just like paper cash, allowing anonymous exchange with the same security as paper.

Sumner: College professors who advocate the elimination of currency are often unaware of how important currency is for those with low incomes, many of who lack bank accounts. For instance, consider someone getting government benefits that are conditional on income (food stamps, EITC, disability, welfare, Medicaid, etc.) This group often faces relatively high implicit marginal tax rates. However currency allows them to supplement their meager benefits with additional earned income, perhaps doing home repair for neighbors, or working as a nanny. Lots of those jobs are paid in cash. If we eliminate physical cash then all transactions will be easily traceable by the government. Obviously that raises privacy concerns, but it also would lead to a decrease in actual GDP. That's bad for two reasons; low-income people would see reduced incomes (increasing inequality), and the rest of us will be denied the services that they might have produced in the underground economy. Economists who advocate the elimination of currency need to consider those side effects.

What Scott really needs to say is that College professors who advocate government controlled fiat technology should re-think their views.