James M. Buchanan on the Ethics of Public Debt and Default

By Alvey, James E. | Journal of Markets & Morality, Spring 2011 | Go to article overview

James M. Buchanan on the Ethics of Public Debt and Default


Alvey, James E., Journal of Markets & Morality


James M. Buchanan (1) won the Nobel Prize in Economic Sciences in 1986. He began work in the 1940s as a Public Finance economist. Buchanan enthusiastically adopted the prevailing positivistic methodology (i.e., Logical Positivism). In a number of areas over the following forty years, Buchanan developed normative aspects of economics. (2) While readers could speculate that this reflected his contributions to two distinct projects, the reality is that there was also some blurring of the boundaries between normative and positive analysis. This article focuses on two related areas in Buchanan's analysis (public debt and default) where positive and normative issues merge.

In his work on public debt, Buchanan began from an engineering perspective, but over time he gradually shifted ground. Buchanan's attachment to positivism weakened and in his work on public debt, he gradually added an ethical dimension. Buchanan extended his work on ethical aspects of debt to public default.

Buchanan builds up a series of ethical arguments on public debt that are scattered throughout various works. In this article, I will reconstruct his ethical framework on debt. Much of Buchanan's constitutional economics is designed to show why the Victorian ethical norm opposing public deficits collapsed and to advocate a legal replacement.

The remainder of this article comprises four sections. The first section presents some background on Buchanan and his work. The second section sketches his foundational assumptions. The third section discusses Buchanan's view of the ethics of public debt and default. Finally, the fourth section provides some concluding remarks.

Background on Buchanan and His Work

Buchanan's work has covered a wide range of areas in economics, starting with public finance. He helped to create the new subdisciplines of Public Choice, (3) and Constitutional Political Economy, and to some extent New Institutional Economics. The foundations of Buchanan's approach to economics I have presented elsewhere (Alvey 2009a). In the current article, I build on that work.

As early as the 1950s, we can see the outlines of Buchanan's contractarian approach to economics. He began to advocate understanding markets in a gains-from-trade framework; potential gains, of course, had to be secured by contracts that are legally enforced (1959, 129; 1975b, 229). Within a few years, Buchanan was calling for economics to focus on catallactics, or exchange (1964a, 214). (4) The next step was to take the contractarian approach and apply it to politics; politics was also viewed as a type of exchange. Thus, his gains-from-trade/contracting approach was foundational for his constitutional political economy research program. Buchanan's approach (in markets and in politics) was to start from the status quo and look for Pareto gains.

Consistent with the dominance of positivism in the early post-World War II period, much of Buchanan's work is positive analysis. Buchanan was a methodologist and tried to consistently apply positivistic doctrines to his own work. Buchanan was also quite happy to criticize others for failing to adhere to the prevailing positivistic strictures. Thus, in the 1960s, he claimed that public goods theory "can be, and should be, wholly wertfei [value free] in an explicit sense" (1967, 197). (5) I will show below that Buchanan's positivism softened over time.

Buchanan's Nobel Prize was awarded "for his development of the contractual and constitutional bases for the theory of economic and political decision-making." In his Nobel lecture, Buchanan makes it clear that economic policy must be considered within the context of the political decision-making framework and that a model of the state and politics is needed before considering the effects of different policy choices (1987a). Given his earlier, enthusiastic adoption of positivism, it is astonishing that Buchanan admitted frankly that in investigating the relation of the individual to the state, his goal was "ultimately normative"; Buchanan added that economists investigating this central topic must place their discussion within the "more comprehensive realm of discourse" of political philosophy (Buchanan 1987a, 335; see also 1991, 4). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

James M. Buchanan on the Ethics of Public Debt and Default
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.