Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of conference participants
- 1 Introduction
- 2 The efficient design of public debt
- 3 Indexation and maturity of government bonds: an exploratory model
- 4 Public confidence and debt management: a model and a case study of Italy
- 5 Confidence crises and public debt management
- 6 Funding crises in the aftermath of World War I
- 7 The capital levy in theory and practice
- 8 Episodes in the public debt history of the United States
- 9 The Italian national debt conversion of 1906
- 10 Fear of deficit financing – is it rational?
- 11 Government domestic debt and the risk of default: a political–economic model of the strategic role of debt
- Discussion
- Index
Discussion
Published online by Cambridge University Press: 05 July 2011
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of conference participants
- 1 Introduction
- 2 The efficient design of public debt
- 3 Indexation and maturity of government bonds: an exploratory model
- 4 Public confidence and debt management: a model and a case study of Italy
- 5 Confidence crises and public debt management
- 6 Funding crises in the aftermath of World War I
- 7 The capital levy in theory and practice
- 8 Episodes in the public debt history of the United States
- 9 The Italian national debt conversion of 1906
- 10 Fear of deficit financing – is it rational?
- 11 Government domestic debt and the risk of default: a political–economic model of the strategic role of debt
- Discussion
- Index
Summary
Can public debt be used in a strategic sense by political parties? More specifically, can one envision governments altering significantly the level of their countries' public debt with a view to improving their chance of being reelected? Aghion and Bolton show that the answer to the first question may be positive. However, they (realistically) refrain from following up with a positive answer to the second, admitting in their conclusions that one does not seem to observe the political behaviour predicted by their model: ‘Are governments perhaps not as cynical as we make them appear in this model?’
Despite this discrepancy between the model and reality, this paper is both enjoyable and interesting and I agree with the authors that its contribution goes beyond one provocative but special result. At a general level it can be viewed as extending to the public debt issue, and to a world where the government's action is purely redistributive, the fundamental idea of the political business cycle literature: electoral considerations may be useful, perhaps necessary, to explain certain elements of economic policy, originally taken to mean macroeconomic policy.
In the first part of the paper, that is, as long as the rate of transformation between the private good and the public good is one, Aghion and Bolton's world is perfectly polarized: all citizens below the mean income level want full taxation and production of the public good at the maximal rate; all citizens above the mean income level want just the opposite: no public good and minimal taxation.
- Type
- Chapter
- Information
- Public Debt ManagementTheory and History, pp. 345 - 349Publisher: Cambridge University PressPrint publication year: 1990