Metaphorically, shoe leather cost
is the cost of time and effort (or opportunity costs
of time and effort) that people expend by holding less cash
in order to reduce the inflation tax
that they pay on cash holdings when there is high inflation
. These costs include, having to make additional trips to the bank
, not being able to make change, or not being able to make unexpected purchases.
The term comes from the fact that more walking is required (historically, although the rise of the Internet
has reduced it) to go to the bank
and get cash
and spend it, thus wearing out shoes more quickly.
A significant cost of reducing money holdings is the additional time and convenience that must be sacrificed to keep less money
on hand than would be required if there were less or no inflation