November, 2016

Macroeconomics, Fiscal Policy, and Public Debt

Conflating Myth and Reality
  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
  • Giuseppe Eusepi

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Find the full working paper at SSRN.

This is the first of six chapters of the penultimate draft of a book titled Public Debt: An Illusion of Democratic Political Economy. The book’s theme is an elaboration and refinement of the early 20th century orientation toward public debt that Antonio de Viti de Marco set forth. As the book’s title asserts, public debt is a misnomer for a democratic scheme of political economy. To declare a democratic polity to be indebted is akin to observing a grin without a cat, to recall Dennis Robertson view of Keynes’s liquidity preference theory. While the entire book develops this claim, this chapter explains how standard macro theories of various types are more myth than reality, and with the mythology obscuring the realities of the domination-subordination relationships that suffuse democratic regimes. To provide an overview of the rest of the book, this essay ends with the book’s Preface.