Channels, Spring 2018

Page 18 Schwartz • Public Principles and Economic Legacy framework of taxes as inherently burdensome and an appropriate individualized level of analysis, among all the contributions in the volume, could disturb the economic orthodoxy on public debt. 22 Fundamentally identifying tax payments as a burden means that debt issue, by definition, shifts the burden to future generations, but for Tobin this is not a given. A final example of an attack on Buchanan’s work came in an article by EJ Mishan. Although only published in 1963, Mishan’s work, “How to Make a Burden of the Public Debt,” was openly targeted against Buchanan’s attempt to establish a viewpoint contrary to Keynesian orthodoxy. Mishan specifically notes the publication of Public Principles of Public Debt as the start of the movement that he describes as the “new heretics.” 23 Mishan critiqued Buchanan on general and specific grounds. First, Mishan argues that future taxes are not necessary if government bond issue creates productive assets. 24 Second, Mishan objects that changing individual tastes indicates a lack of guaranteed welfare increase for the bondholder. 25 For example, a bondholder might prefer today a certain level of current consumption and future income, but in ten years the preferred ratio may be so wholly changed that the bondholder will recognize a loss of utility, despite the fact that his past action was preferred at that time. Mishan’s arguments include repeated appeals to the idea that government will not spend wastefully and that government spending can certainly produce “a greater social yield than that arising from private expenditure.” 26 Assuming this argument and comparing relevant alternatives, as Buchanan does throughout his work, should lead to a result in favor of government finance. In other areas of the new orthodoxy, Mishan defends simply by restatement. For instance, regarding Buchanan’s arguments on internal and external debt, Mishan points out that Buchanan cannot “detract from the simple proposition that if an existing debt is internally held ‘we owe it to ourselves,’ while if it is held externally ‘we owe it to the foreigner.’” 27 Lengthy quotes of A.C. Pigou serve to strengthen his arguments with authority. Buchanan’s framework regarding the effect of government bond issue on private savings is faulty on the theory of these past thinkers because he ignores Ricardian equivalence, the resultant inflation, and a change in savings preferences resulting from the bond issue which Keynesianism expects. 28 Mishan’s arguments are strongest when he concedes points to Buchanan, but notes that Keynesianism or the “new orthodoxy” would already endorse these points wholeheartedly. For instance, Mishan admits government surely should not spend when funds could be used more productively in the private sector but that current public expenditures have higher social yield than if left to private sector. 29 Mishan’s article is representative of the various attempts to defend the Keynesian 22 Ibid, 682. 23 E.J. Mishan, “How to Make a Burden of the Public Debt,” The Journal of Political Economy LXXI , no. 6, (Dec. 1963), 530-531. 24 Ibid, 533. 25 Ibid, 533. 26 Ibid, 534. 27 Ibid, 535. 28 Ibid, 532 29 Ibid, 532