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Why We Like Crisp, New Dollar Bills

Stacks of $100 bills are loosened before the Bureau of Engraving and Printing cuts them into singles in Washington

Photograph by Andrew Harrer/Bloomberg

Stacks of $100 bills are loosened before the Bureau of Engraving and Printing cuts them into singles in Washington

Economists may understand money, but they don’t get cash. Not just a means of payment, cash is a consumer item that people like fresh and clean, like lettuce. So say two marketing professors in a study that will be published in the April 2013 issue of the Journal of Consumer Research.

Their study’s lengthy title says it all: “Money Isn’t Everything, But It Helps If It Doesn’t Look Used: How the Physical Appearance of Money Influences Spending.”

In five studies with University of Winnipeg undergraduates, the researchers found that people tend to spend worn bills faster to get rid of them. But when they think they’re being watched, pride kicks in and they pull out crisp bills to show off.

“People want to rid themselves of worn bills because they are disgusted by the contamination from others, whereas people put a premium on crisp currency because they take pride in owning bills that can be spent around others,” write Fabrizio Di Muro, of the University of Winnipeg, and Theodore Noseworthy, who is affiliated with the University of Guelph and the University of Cincinnati’s Lindner College of Business.

The professors identify what they call a “push-and-pull emotional mechanism.” Namely, “People generally spend more when they have worn bills and spend less when they have crisp bills.” However, “People tend to spend crisp bills more when they believe they are being socially monitored.”

Distaste for older bills is not completely irrational. The researchers note that when the U.S. Federal Reserve removes a bill from circulation, it’s usually not because it’s worn but because its “soil content” is too high—i.e., too many bacteria are living on it. Yuck.

Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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