Shoeleather costs arise due to the increased frequency of economic transactions undertaken by individuals in response to higher inflation rates. As inflation erodes the purchasing power of money, people make more frequent trips to the store or bank to exchange their depreciating currency for goods and services. This increased economic activity leads to higher transaction costs, including the time and effort spent commuting and waiting in line, which are referred to as “shoeleather costs.”
Shoeleather costs represent a significant burden on the economy, particularly for low-income households and those living in remote areas with limited access to financial services. The phenomenon has been observed throughout history, with notable examples during periods of hyperinflation, such as in Germany in the 1920s and Zimbabwe in the 2000s. Reducing inflation rates is, therefore, a key policy objective for central banks and governments worldwide, as it helps mitigate shoeleather costs and promotes economic stability.
