Channels, Spring 2018

Page 20 Schwartz • Public Principles and Economic Legacy The significance of Buchanan's analysis lies in the general framework which it provides for public debt analysis. A framework within which public debt may be analyzed under the Classical economic condition of full employment and the Keynesian economic condition of unemployment; a framework which has its philosophical starting point in the individual or the family; a framework which discards the pain cost doctrine and replaces it with the opportunity cost doctrine; a framework which views the relevant alternatives of private lenders and the differential effects of tax, debt, and currency financing; a framework which distinguishes between the effects of securing funds and the effects of spending these funds, and considers the combined effect of the financing-spending operation: a framework which provides the basis for better public policy decisions. Overall, the reviews may demonstrate a slight consensus that saw Public Principles of Public Debt as a key contribution that is most important in its overall framework for understanding public debt in times of full employment or unemployment. It would go too far to argue that all reviewers saw Buchanan’s analysis as scholarly, strong, logical, and dispassionate, making this work a powerful contrast to prevailing economic theory. Nevertheless, some certainly were of this opinion, and the key points of agreement, among both supporters and opponents of Buchanan’s early contributions, were that he had succeeded in generating a significant contrast with prevailing theory that, if accurate, had serious implications for the field of public finance. Buchanan’s Responses to Critiques Buchanan continued to engage in this developing debate, defending his ideas and their formulation by responding to critics. One example would be his response to EJ Mishan, entitled “Confessions of a Burden Monger,” in the Journal of Political Economy. In this essay, Buchanan argued that the taxpayer under normal “voluntaristic political” conditions will not discount future tax payments as a result of their knowledge of the increasing debt level. 36 He did not reject the equivalent response to tax or loan financing under conditions of “perfect certainty and perfectly working capital markets,” but simply found this theoretical consideration to be practically unimportant. 37 In Buchanan’s mind, the methods of tax and debt finance are alternatives for public financing of expenditures. Indeed, the very point of debt, both in general and as a contrast to tax finance, is to push costs into the future. 38 Finally, Buchanan made methodological observations regarding Mishan’s criticisms. Buchanan pointed out Mishan’s inability to separate debt issue and money issue as different means of government finance, arguing that the merits of each depends on the 36 James Buchanan, The Collected Works of James Buchanan, Vol. 14, Debt and Taxes, “Confessions of a Burden Monger,” (Liberty Fund Inc., Indianapolis: IN, 1999), 358. 37 Ibid, 358. 38 Ibid, 358.