There are, however, costs of inflation that are relevant from an economic perspective and cannot be easily avoided.
When prices are constant over long periods of time, firms benefit in that they don't need to worry about changing the prices for their output. When prices change over time, on the other hand, firms would ideally like to change their prices in order to keep pace with the general trends in prices, since this would be the profit-maximizing strategy. Unfortunately, changing prices is generally not costless, since changing prices requires printing new menus, relabeling items, and so on. These costs are referred to as menu costs, and firms have to decide whether to operate at a price that is not profit-maximizing or incur the menu costs involved in changing prices. Either way, firms bear a very real cost of inflation.
Whereas firms are the ones who directly incur menu costs, shoeleather costs directly impact all holders of currency. When inflation is present, there is a real cost to holding cash (or holding assets in non-interest bearing deposit accounts), since the cash won't buy as much tomorrow as it could today. Therefore, citizens have an incentive to keep as little cash on hand as possible, which means that they have to go to the ATM or otherwise transfer money on a very frequent basis. The term shoeleather costs refers to the figurative cost of replacing shoes more often due to the increase in the number of trips to the bank, but shoeleather costs are a very real phenomenon.
Shoeleather costs are not a serious issue in economies with relatively low inflation, but they become very relevant in economies that experience hyperinflation. In these situations, citizens generally prefer to keep their assets as foreign rather than local currency, which also consumes unnecessary time and effort.
Misallocation of Resources
When inflation occurs and prices of different goods and services rise at different rates, some goods and services become cheaper or more expensive in a relative sense. These relative price distortions, in turn, affect the allocation of resources toward different goods and services in a way that would not happen if relative prices remained stable.
Unexpected inflation can serve to redistribute wealth in an economy because not all investments and debt are indexed to inflation. Higher than expected inflation makes the value of debt lower in real terms, but it also makes the real returns on assets lower. Therefore, unexpected inflation serves to hurt investors and benefit those who have a lot of debt. This is likely not an incentive that policymakers want to create in an economy, so it can be viewed as another cot of inflation.
In the United States, there are many taxes that do not automatically adjust for inflation. For example, capital gains taxes are calculated based on the absolute increase in value of an asset, not on the inflation-adjusted value increase. Therefore, the effective tax rate on capital gains when inflation is present may be much higher than the stated nominal rate. Similarly, inflation increases the effective tax rate paid on interest income.
Even if prices and wages are flexible enough to adjust well for inflation, inflation still makes comparisons of monetary quantities across years more difficult than they could be. Given that people and companies would like to fully understand how their wages, assets, and debt evolve over time, the fact that inflation makes it more difficult to do so can be viewed as yet another cost of inflation.