Abstract
Classical principles of public debt limited debt financing to non-recurrent, extraordinary or temporary demands. Keynesian macroeconomics, viewing budget deficits as the only means of financing demand-increasing deficits during depressions, overlooked the exchange between government and lenders in debt-financed public expenditure. In the post-Keynesian 1970s and 1980s, governments explicitly used debt to finance ordinary public consumption, including transfers, which was equivalent to a destruction in national capital value and raised the prospect of default. Fiscal responsibility demands that the classical principles of public debt must eventually return to general acceptance.
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
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Buchanan, J.M. (2008). Public Debt. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1883-2
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DOI: https://doi.org/10.1057/978-1-349-95121-5_1883-2
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Publisher Name: Palgrave Macmillan, London
Online ISBN: 978-1-349-95121-5
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Chapter history
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Latest
Public Debt- Published:
- 17 March 2017
DOI: https://doi.org/10.1057/978-1-349-95121-5_1883-2
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Original
Public Debt- Published:
- 26 November 2016
DOI: https://doi.org/10.1057/978-1-349-95121-5_1883-1