• Table of Contents
    • Abstract
    • Keywords
    • Article
      • I Taxes, money and public debt
      • II The Ricardian theorem on the equivalence between taxation and government borrowing
      • III Classical principles of public debt
      • IV Public debt in Keynesian macroeconomics
      • V Public debt and deficits in postKeynesian politics
      • VI Return to classical principles?
    • See Also
    • Bibliography
    • How to cite this article

public debt

James M. Buchanan
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
Alternate versions available: 1987 Edition
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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.
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Keywords

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Article

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How to cite this article

Buchanan, James M. "public debt." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 31 October 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_P000241> doi:10.1057/9780230226203.1362

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