Notice:  As of December 14, 2016, the MindBites Website and Service will cease its operations.  Further information can be found here.  

Hi! We show you're using Internet Explorer 6. Unfortunately, IE6 is an older browser and everything at MindBites may not work for you. We recommend upgrading (for free) to the latest version of Internet Explorer from Microsoft or Firefox from Mozilla.
Click here to read more about IE6 and why it makes sense to upgrade.

Economics: Case Study: The Cashless Society


Like what you see? false to watch it online or download.

You Might Also Like

About this Lesson

  • Type: Video Tutorial
  • Length: 8:05
  • Media: Video/mp4
  • Use: Watch Online & Download
  • Access Period: Unrestricted
  • Download: MP4 (iPod compatible)
  • Size: 87 MB
  • Posted: 03/29/2010

This lesson is part of the following series:

Economics: Full Course (269 lessons, $198.00)
Economics: Banking, Spending, Saving and Investing (19 lessons, $30.69)
Economics: Money in the Economy (4 lessons, $6.93)

This economics video lesson looks at the ideas behind a Cashless Society. Taught by Professor Tomlinson, this lesson was selected from a broader, comprehensive course, Economics. This course and others are available from Thinkwell, Inc. The full course can be found at The full course covers economic thinking, markets, consumer choice, household behavior, production, costs, perfect competition, market models, resource markets, market failures, market outcomes, macroeconomics, macroeconomic measurements, economic fluctuations, unemployment, inflation, the aggregate expenditures model, banking, spending, saving, investing, aggregate demand and aggregate supply model, monetary policy, fiscal policy, productivity and growth, and international examples.

Steven Tomlinson teaches economics at the Acton School of Business in Austin, Texas. He graduated with highest honors from the University of Oklahoma and earned a Ph.D. in economics at Stanford University. Prof. Tomlinson's academic awards include the prestigious Texas Excellence Teaching Award given by the University of Texas Alumni Association and being named "Outstanding Core Faculty in the MBA Program" several times. He has developed several instructional guides and computerized educational programs for economics.

About this Author

2174 lessons

Founded in 1997, Thinkwell has succeeded in creating "next-generation" textbooks that help students learn and teachers teach. Capitalizing on the power of new technology, Thinkwell products prepare students more effectively for their coursework than any printed textbook can. Thinkwell has assembled a group of talented industry professionals who have shaped the company into the leading provider of technology-based textbooks. For more information about Thinkwell, please visit or visit Thinkwell's Video Lesson Store at

Thinkwell lessons feature a star-studded cast of outstanding university professors: Edward Burger (Pre-Algebra through...


Recent Reviews

This lesson has not been reviewed.
Please purchase the lesson to review.
This lesson has not been reviewed.
Please purchase the lesson to review.

I came to the grocery store today knowing in advance that I don't have any money. That is, there's no cash in my wallet. And time was, this would be a big problem at the grocery store. Nowadays however, there are lots of ways to pay for your groceries.
I could write a personal check, but that's going to have problems. Joe's going to be concerned about whether the check is good, which means he's got to go to the trouble of calling the bank or using a check verification service. I than have to worry about whether someone at the store might use my check unscrupulously, maybe photo copy it and try to pass it off as their own. So, checks are convenient, but they have risks.
I could also use a credit card, but the credit card doesn't finally settle this transaction. A credit card is just my way of making a short term loan to myself which I have to pay off at the end of the month, either by writing a check or directing my bank to take the money from my account and give it to the credit card company. So, that just puts off the day of reckoning.
I could, however, also use a debit card. A debit card would electronically take the money out of my checking card. Joe likes that because he doesn't have to worry about the risks. The money shows up immediately. But, debit cards make me nervous. Not only do I lose the float, that is, I lose interest till the end of the month like I get with my credit card, but what if somebody found this card and figured out my personal identification number? A lot of money could come out of my checking account very quickly. So, I kind of keep this in a safe place, although it is convenient. Again, there's still risks associated with it.
Money is getting easier and easier to use as innovations and technology and creativity create new forms in which we can settle transactions at the grocery store. One of the hottest ideas in payment these days is electronic cash, or "E" cash. And the forms that it takes look a like debit cards and credit cards, physical forms that we're used to. Only nowadays what we're getting are called "electronic wallets." They're cards with little computer chips on them. And you take these chips to machines, kiosks at a shopping center or post office, plug in your card, enter your pin number and have money downloaded from your checking account directly to this computer chip. Now I can take this card to any store that has a chip reader and pay as if I had cash. Plug it in and enter the amount I want to pay, and it's transferred directly to Joe's account. I can see right here on the screen how much money is being taken off my card, so I have the confidence of knowing I'm not being defrauded, and Joe knows that he's also in a situation that's safe. It's great, plus if I lose the card, I don't lose my whole bank account. I lose only the case that I down loaded onto this card. So, I'll keep it in a safe place just like I'd keep the green folding stuff.
Electronic cash doesn't even have to be administered by banks. People who get credit from me, either by me giving them my credit card number, or me writing them a check, or any form in which I can transfer money to them, can then watch my money for me. Any company could issue these chip cards. In fact, on the Internet nowadays, you have companies that use electronic case. They get credit from my credit card or a check that I send to them and then they dole out money to the people from whom I buy things online. When I buy books or computer parts, or cd's, they take care of settling the payment by transferring money electronically to the accounts of those business.
"E" cash, chip cards, online money being sent around in wires. This is the direction are going and banks don't even have to be involved. More and more, the payment system can be run by non-bank companies. Remember, a bank is a financial intermediary that makes loans as well as accepting deposits. But the payment system, eventually, can circumvent banks entirely. In fact, it doesn't even have to involve dollars at all. We can have commerce that's settled in frequent flier miles or long distance telephone minutes. But I'm getting ahead of myself.
Why is it that electronic commerce isn't already entirely ruling shopping? Why isn't "E" cash the payments norm everywhere? There's certainly great benefits to "E" cash. One of the benefits is it doesn't involve paper checks. Paper checks are expensive. It takes about five billion dollars worth of human labor and resources a year to truck those checks around and get them cleared from one bank to the next, whereas electronic commerce is relatively inexpensive. Once you've got these payment readers installed at stores, it costs almost nothing for me to pay Joe using a chip card. Another thing is I don't have to worry about the fraud involved with checks, and Joe doesn't have to worry about any fraud from his employees taking paper money out of the cash register at night. A lot of the fraud that's involved with paper payments is completely eliminated. Some other advantages are: it's very, very convenient. It seems like I've also got my card with me and it's very easy to carry around.
The reason "E" cash isn't the norm nowadays is there are costs and risks associated with it that we still, as a culture, haven't gotten over. One is that there is some concern about security. Think about the difference between car crashes and airplane crashes. Car crashes happen all the time, but because relatively few people are involved in any single accident, they don't make the headline news. Whereas plane crashes, which are very, very rare, make the headlines because a lot of people are involved in the catastrophe and are affected.
Now, paper checks are fraudulently used every day. And cash is stolen every day, but that doesn't make the headlines. But, if somebody hacks in to an "E" cash computer somewhere, and messes with the payment system, that's all over the front pages because it's a big, catastrophic, and focal news event. So, fraud with "E" cash is probably going to be less common and less damaging overall, but because it's scary and it strikes at the heart of our confidence in the payment mechanism, it tends to be bigger news. So, there are certainly security questions about whether hackers could mess with and "E" cash system.
Another thing about "E" cash that gets people worked up is privacy. I mean, do we really want the government knowing everywhere we spend our money? But with these chip cards now, there can be anonymity built in. I can download the cash from my account and maybe the account number doesn't come with it. So, whenever I come to the store, and use my chip card, I can pay without necessarily having to give my name. Once you can have anonymity involved with "E" cash, then it has a lot of the advantages of the green folding stuff.
Another concern with "E" cash is that once the banking system is circumvented, the Federal Reserve loses its control over the money supply. And certainly, once we start using frequent flier miles and long distance minutes as cash, the Fed is in a really tough position as far as controlling the payments mechanism or the money supply. That can be a very big concern, because then how do we control inflation and interest rates, and other macro-economic policy variables? Another concern is concern about taxes, concern about criminal activities, all kinds of things that have particular concern for "E" cash in ways that paper money doesn't raise the same set of questions.
So, what will money eventually become? Chip cards are a great new development that are going to catch on more and more as people see that they can be convenient and anonymous and very safe to use.
However, money is an idea. Money is a stream of zeroes and ones out there floating through the ether. It's just numbers on a balance sheet. And so, why do I need a card at all? Why can't some very smart reader pick up all the information it needs from me, including all my account information from some simple bit of biometric data, so that whenever I show up at the grocery store, all I have to do is identify myself, give my approval to the transaction and it's all settled?
Money: Banking, Spending, Saving, and Investing
Money in the Economy
Case Study: The Cashless Society Page [2 of 2]

Embed this video on your site

Copy and paste the following snippet: