The Nobel prize in economics came out, and it went to Finn Kydland and Edward Prescott for work on dealing with children. Okay, not exactly. The announcement mentions their important work on time consistency. It works like this. You tell your teenage kid to mow the lawn, and promise you will drive him to the mall if he does. But you do not want to drive him to the mall, because you are tired and do not feel like driving. So, when he finishes the lawn, you renege on your promise. A good deal, no? Except that your kid can figure out that it is in your best interests to renege on the deal, so he does not believe your promise and does not mow the lawn.

Take a different application, if you are not keen on children. Governments would like to promise low taxes to encourage higher output. Then when the higher output shows up, they have an incentive to raise taxes on all that income. Taxpayers expect the government to renege (because it is in the government's interest to do so), and so do not produce the extra output.

The problem arise because of discretion. You have the discretion to renege on your promise to drive your kid to the mall. The government has the discretion to raise tax rates after promising to keep them low. Discretion may be bad for you.