Debt Default and Democracy
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Debt Default and Democracy

Edited by Giuseppe Eusepi and Richard E. Wagner

The original chapters in this book connect the microeconomic and macroeconomic approaches to public debt. Through their thought-provoking views, leading scholars offer insights into the incentives that individuals and governments may have in resorting to public debt, thereby promoting a clearer understanding of its economic consequences.
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Chapter 3: Political obligations: is debt special?

Geoffrey Brennan


The very existence of public debt presupposes an ethical commitment by current governments to fulfil the undertakings of predecessors – or at least a belief among potential bondholders that such a commitment exists. This commitment should not be confused with electoral ‘promises’, which serve a different (weak signalling) function: the ‘political obligations’ associated with public debt are stronger than those associated with electoral promises. There is, moreover, an ethical dimension to electoral behaviour: individual voters’ ethical commitments play a role in their choosing how to vote – a more significant role than ethical commitments play in market choices. This ethical dimension may conceivably overcome the interest-based incentive nations have in free-riding on global climate deals. But that is more likely to be so if emission-reduction policies are financed out of public debt. However, debt-financing is a disappearing option, because in most countries debt is at levels that are inhospitable to further increase.

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