Indebted State versus Intermediary State: Who Owes What to Whom?

29 Pages Posted: 30 Jun 2011

See all articles by Giuseppe Eusepi

Giuseppe Eusepi

Sapienza University of Rome

Richard E. Wagner

George Mason University - Department of Economics; George Mason University - Mercatus Center

Date Written: June 30, 2011

Abstract

Ratios of public debt to GDP are much discussed these days and questions concerning debt relative to taxation have long been explored by fiscal scholars. With respect to monarchical regimes, it seems reasonable to treat public debt as similar to personal debt, recognizing that a monarch is not an ordinary person. When public debt arises through parliamentary assemblies, however, the similarity of form between public and personal debt vanishes because a parliamentary assembly does not trade on its own account; to the contrary, it is a type of intermediary that brings together people who buy bonds and people who later pay the bondholders. In a republic there is no sovereign who is indebted to ruled subjects. The institutional framework of republican governance transforms public borrowing into a process of intermediation among citizens, which leads in turn to the alternative orientation toward public debt that this paper explores.

Keywords: Ricardian equivalence, public debt vs. personal debt, unfunded liabilities, public debt as fiscal intermediation, Antonio De Viti de Marco

JEL Classification: E6, H2, H6

Suggested Citation

Eusepi, Giuseppe and Wagner, Richard E., Indebted State versus Intermediary State: Who Owes What to Whom? (June 30, 2011). GMU Working Paper in Economics No. 11-29, Available at SSRN: https://ssrn.com/abstract=1875202 or http://dx.doi.org/10.2139/ssrn.1875202

Giuseppe Eusepi

Sapienza University of Rome ( email )

Via del Castro Laurenziano, 9
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Italy
+39 06 49766955 (Phone)

Richard E. Wagner (Contact Author)

George Mason University - Department of Economics ( email )

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HOME PAGE: http://mason.gmu.edu/~rwagner/

George Mason University - Mercatus Center ( email )

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Arlington, VA 22201
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HOME PAGE: http://ppe.mercatus.org/scholars/richard-wagner

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