Channels, Spring 2018

Page 40 Schwartz • Public Principles and Economic Legacy achieving fiscal sustainability has on particular generations.” 145 This very approach owes much to Buchanan’s refutation of Keynesian thought. If the future impact of debt operations is considered merely in terms of internal transfers which have no aggregated national impact then future generations are irrelevant to the public debt discussion. Kotlikoff, however, pursues studies of whether government debt issue creates productive assets or “an added burden that current and future generations must bear.” 146 This interest in burden is directly aligned with Buchanan’s initial focus in Public Principles of Public Debt , and Kotlikoff’s work thereby represents, to some extent, an extension of Buchanan’s thought into the current period. Kotlikoff has certainly adapted some of the modern techniques such as an overlapping generations model, a form which Robert Barro also utilized. 147 This allows Kotlikoff to avoid some of the criticisms of Buchanan, noted above, for excessive aggregation in his divided generations model. However, like Buchanan and in contrast to Barro, Kotlikoff sees institutional action as one way of addressing the challenges of current incentivization toward public profligacy. 148 Thus, Dr. Kotlikoff represents an influential current practitioner in the field of public finance whose mode of analysis and conclusions both resemble those of James Buchanan. Conclusion James Buchanan’s work on the public debt made major contributions to the field of public finance generally and enlivened heated debates about the appropriate theoretical approach and the most accurate empirical arguments. His arguments in Public Principles of the Public Debt led to a shift in the majority opinion among economists in some areas, particularly regarding the incidence of the debt’s burden on future taxpayers. Nevertheless, other elements of his work, such as the rejection of a categorical difference between internal and external debt, or the continual critiques of Ricardian equivalence, have not been widely incorporated into the economic literature. Current articles often depend on these very assumptions that Buchanan rejected. A revived understanding of Buchanan’s public finance work on public debt in particular will be valuable for precise study along those lines moving forward. The current economic realities provide a wealth of opportunity for examining theories of public debt as the global economy and advances in information technology allow for more interconnected and deeper research more than ever before. Yet, economists must avoid the tendency to assume that all assumptions are neutral until associated with data. Without the correct assumptions, datasets may be extremely liable to misinterpretation. Therefore, a renewed engagement in the dialogue over an accurate framework for understanding the 145 Laurence Kotlikoff, “Assessing Fiscal Sustainability,” Mercatus Center, December 12, 2013, 5. 146 Ibid, 5. 147 It should be noted that the formal similarity between Barro and Kotlikoff in modeling does not lead to particularly similar conclusions due to the different assumptions used. 148 Ibid, 21. Kotlikoff supports the Inform Act as a way to promote accountability, much as Buchanan backed a balanced budget amendment, although the constitutional significant of each is different. Nevertheless, as noted earlier, Barro found any restrictions on government action a possible cause of inefficiency which would be sub-optimal.