MONEY IS PRIVACY

Charles Kahn, James McAndrews and William Roberds

International Economic Review, 2005, vol. 46, issue 2, 377-399

Abstract: 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. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2005
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