September, 2014

James Buchanan’s Public Debt Theory: A Rational Reconstruction

  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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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. Such treatment is standard fare for those macro theorists who work with representative agents and societal averages in place of the actual individuals who constitute a society. This treatment, however, conflicts with the central tenor of Buchanan’s scholarly oeuvre. This essay undertakes a rational reconstruction to render reasonable his claim about debt shifting, while also rendering it consistent with his oft-repeated claim that cost can be experienced only by individuals and never by such aggregates as generations. This reconstruction reveals a cleavage between approaching public debt through macro theory and approaching it through public finance.

Find the article at SpringerLink.