Public Principles and Economic Legacy

Abstract 2018 will mark the 60 th anniversary of the publication of Public Principles of Public Debt. The Nobel-prize winning economist’s first book conflicted with the Keynesian orthodoxy of the day, and added fresh ideas to an ongoing debate over the fundamentals of public debt theory. This paper seeks to outline the dialogue among leading economists surrounding public debt since the publication of Public Principles of Public Debt, examining the major schools of thought and their development. The ideas of John Maynard Keynes, James Buchanan, and Richard Barro will receive attention, without neglecting other significant contributions. The paper will conclude by examining current papers in the field of public debt theory, considering them in light of the noted historical ideas. Despite the foundational nature of James Buchanan’s work in public finance, his cautions regarding the assumptions, methodology, incentives, and institutions of public debt, particularly his integration of public choice, are not treated centrally in many ongoing analyses. The empirical nature of much current public debt theory and research has led away from the presuppositional roots of the public debt debate. Renewed awareness of the historical and theoretical realities of public debt theory will be valuable for the field, and can provide reinvigorated application of public choice. This paper works toward those goals, examining the 60 years of public debt theory history since the publication of James Buchanan’s Public Principles of Public Debt and considering current work in the field.