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My third proposition is that institutions can do the work of money rules. The dynamic consistency problem is real, important,and no doubt the essence of the inflation problem. For example, it always looks good ex post to cancel your exams so that you don't have to grade them; the students have already studied. Likewise, it always looks good to inflate a little more than people expect. One solution to the dynamic consistency problem is to have a rule to which you are absolutely committed, so that cheating ex-post is impossible.

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