James Buchanan’s public debt theory: a rational reconstruction

Abstract

James Buchanan’s Public Principles of Public Debt is universally associated with the claim that debt allows the cost of public activity to be shifted onto future generations. This claim treats a generation as a unitary and acting entity. Such treatment is standard fare for those macro theorists who work with representative agents and societal averages in place of the actual individuals who constitute a society. This treatment, however, conflicts with the central tenor of Buchanan’s scholarly oeuvre. This essay undertakes a rational reconstruction to render reasonable his claim about debt shifting, while also rendering it consistent with his oft-repeated claim that cost can be experienced only by individuals and never by such aggregates as generations. This reconstruction reveals a cleavage between approaching public debt through macro theory and approaching it through public finance.