James Buchanan's Public Debt Theory: A Rational Reconstruction

22 Pages Posted: 27 Oct 2013

See all articles by Richard E. Wagner

Richard E. Wagner

George Mason University - Department of Economics; George Mason University - Mercatus Center

Date Written: October 25, 2013

Abstract

James Buchanan’s Public Principles of Public Debt is universally associated with the claim that debt allows the cost of public activity to be shifted onto future generations. This claim treats a generation as a unitary and acting entity. While such treatment is standard fare for macro theorists who work with representative agents and societal averages in place of the individuals who constitute a society, such treatment conflicts with Buchanan’s Cost and Choice and, indeed, his entire oeuvre. This essay undertakes an act of rational reconstruction that renders his 1958 claim both reasonable and consistent with his formulation in Cost and Choice where cost can be experienced only by individuals. This rational reconstruction reveals a cleavage between public debt approached through macro theory and public debt approached through public finance. Public Principles was generally treated by economists as macro theory when it was really about public finance and political economy.

Keywords: Public Principles of Public Debt; burden of public debt; Ricardian equivalence; Cost and Choice; Atillio Da Empoli and oblique incidence; morality of public debt; debt default

JEL Classification: B22, D72, E62, H63

Suggested Citation

Wagner, Richard E., James Buchanan's Public Debt Theory: A Rational Reconstruction (October 25, 2013). GMU Working Paper in Economics No. 13-24, Available at SSRN: https://ssrn.com/abstract=2345513 or http://dx.doi.org/10.2139/ssrn.2345513

Richard E. Wagner (Contact Author)

George Mason University - Department of Economics ( email )

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HOME PAGE: http://mason.gmu.edu/~rwagner/

George Mason University - Mercatus Center ( email )

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HOME PAGE: http://ppe.mercatus.org/scholars/richard-wagner

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