Money Is Privacy*

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. * Manuscript

Money and Credit Redux

“…In terms of other models, those that impose an exogenous partition of commodity space into cash goods and credit goods, like Lucas and Stokey (1987), are not useful for our purposes. Slightly better are setups with intrinsic properties favoring some instruments over others-for example, He, Huang, andWright (2005, 2008) and Sanches and Williamson (2010) assumed cash is subject to theft while credit or bank deposits are not, while Kahn, McAndrews, and Roberds (2005) and Kahn and Roberds (2008) assumed the opposite (Nosal and Rocheteau (2011) discussed related work). This transactions-cost approach is interesting, and may change some of the results, just like it can for Modigliani-Miller, Karaken-Wallace, or Ricardian equivalence, but for the most part we want to give money and credit equal opportunities.…”

Introduction to “Models of Monetary Economies II: The Next Generation”

“…In addition to the formal results, a feature of this work that makes it an important contribution to the current volume, is that it is a nice example of the recent approach of using mechanism design theory to discuss monetary institutions in a concise way. 3 The article by Kahn et al (2005) takes a novel approach to thinking about money. Recent authors have emphasized that imperfect record keeping (or memory or 307 monitoring) is critical for money to be essential-i.e., essential in the precise sense that we can support better outcomes as equilibria with money than we can without it.…”

Efectivo y pagos electrónicos

“…trumento de pago más simple para efectuar transacciones, y que a su vez funciona como depósito de valor; es fácil de usar, inmediato en la disponibilidad de los fondos para el beneficiario de un pago y no requerir sistemas complejos de validación (Kocherlakota, 1998;Kahn et al, 2005). Estos atributos han hecho que el efectivo continúe siendo demandado, y de manera creciente, en las economías desarrolladas y en desarrollo.…”