Government Debt in Economic Thought of the Long 19th Century

Abstract

The positions of British and German economists on public debt in the long 19th century differed substantially from each other. While British classical economists regarded any public debt as ruinous for the country, German economists promoted debt accumulation for productivity-enhancing public investment and current outlays with benefits for future fiscal years. This paper contrasts the positions of the most prominent British economists before 1850, Adam Smith, David Ricardo, Thomas R. Malthus, and John Stuart Mill, with those of their German colleagues Carl Dietzel, Lorenz v. Stein, and Adolph Wagner after 1855. Due to similar political and economic developments in the last third of the 19th century, young, later famous American economists preferred to pursue their graduate studies in Germany.