Economists Don Boudreaux and Randall Holcombe collaborated on a newly published book titled, The Essential James Buchanan, which covers the work of this eminent economist. Buchanan received a Nobel Prize for his work on Public Choice. My interest and the subject of this article is restricted to a secondary work of Buchanan’s, The Public Principles of Public Debt, which Boudreaux and Holcombe discuss in Chapter 6.
I congratulate Boudreaux and Holcombe (B&H going forward) for discarding aged conventions and focusing on the true nature of public finance. I have long argued that examining the finances of government, an entity devoid of the means of funding itself, can yield only erroneous and bewildering conclusions. B&H, like David Ricardo 200 years before, wisely shift the focus to what actually funds government, to the combined assets of the residents of a community, the true source of the government’s spending power. Unfortunately, poor analysis badly mars this theoretical leap forward, but old conventions are beginning to fracture nicely.
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