The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Public Debt

  • James M. Buchanan
Reference work entry


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.


Assets and liabilities Barro, R. Buchanan, J. M. Budget deficits Capital value Default Fiscal responsibility Keynesian revolution Neutrality theorem New classical macroeconomics Public debt Ricardian equivalence theorem Ricardo, D. Taxation 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • James M. Buchanan
    • 1
  1. 1.