Organizing phenomena into classes is a pervasive human activity. The ability to classify phenomena encountered in daily life in useful ways is essential to human survival and adaptation. Not surprisingly, then, classification-oriented activities are widespread in the information systems field. Classes or entity types play a central role in conceptual modeling for information systems requirements analysis, as well as in the design of databases and object-oriented software. Furthermore, classification is the primary task in applications such as data mining and the development of domain ontologies to support information sharing in semantic web applications. However, despite the pervasiveness of classification, little research has proposed well-grounded guidelines for identifying, evaluating, and choosing classes when modeling a domain or designing information systems artifacts. In this paper, we adopt the cognitive notions of inference and economy to derive a set of principles to guide effective and efficient classification. We present a model for characterizing what may be considered useful classes in a given context based on the inferences that can be drawn from membership in a class. This foundation is then used to suggest practical design rules for evaluating and refining potential classes. We illustrate the use of the rules by showing that applying them to a previously published example yields meaningful changes. We then present an evaluation by a panel of experts who compared the published and revised models. The evaluation shows that following the rules leads to semantically clearer models that are preferred by experts. The paper concludes by outlining possible future research directions.