This paper reviews the key economic issues concerning the welfare costs of inflation and deflation, with a view to shedding light on the desirable properties of the inflation process. Our review of the evidence on the overall costs of inflation and deflation indicates that such costs could be...

Incomplete information is a commitment device for time consistency problems. In the context of time consistent labor income taxation privacy can lead to a Pareto superior outcome and increases the effectiveness of public education as a second best policy.