Money is Privacy
Charles M. Kahn
University of Illinois, Urbana-Champaign
Federal Reserve Bank of New York
Federal Reserve Bank of Atlanta
International Economic Review, Vol. 46, No. 2, pp. 377-399, May 2005
An extensive literature in monetary theory has emphasized the role of money as a record-keeping device. Money assumes this role in situations where using credit would be too costly, and some might argue that this role will diminish as the cost of information and thus the cost of credit-based transactions continues to fall. In this article we investigate another use for money, the provision of privacy. That is, a money purchase does not identify the purchaser, whereas a credit purchase does. In a simple trading economy with moral hazard, we compare the efficiency of money and credit, and find that money may be useful even when information is free.
Number of Pages in PDF File: 23
Date posted: May 5, 2005
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