De Viti de Marco vs. Ricardo on public debt: self-extinction or default?

The most prominent Italian theorist of the late 19th and early 20th centuries, Antonio de Viti de Marco, accepted David Ricardo’s proposition that an extraordinary tax and a public loan are equivalent. Despite this common point of analytical departure, their theories of public debt diverged sharply. In this divergence, moreover, lies a fundamental gulf between two distinct analytical schemes for connecting the micro and macro levels of analysis. Ricardo treated macro aggregates as analytical primitives, with individual action being induced from those aggregates. In sharp contrast, de Viti took individual variables as primitive, with aggregate conditions being induced from interaction among those individual variables. Within de Viti’s framework of a fully cooperative state, public debt would be self-extinguishing. De Viti also recognized that democracies were never exclusively cooperative, as continuing competition among elites striving for power would enable politically dominant groups to pass cost onto the remainder of society, thereby operating as a de facto form of default

Public finance and welfare: From the ignorance of the veil to the veil of ignorance

Present-day welfare states may survive as long as bureaucracies and governments can create "optimistic" illusions among taxpayers-voters. This setting is destined to fail and indirectly to open up the pathway for a constitutional welfare state. Mazzola and Wicksell first offered a constitutional view on both public choice and public goods, but the intellectual godfathers of the genuine alternative to the present welfare state are Buchanan and Tullock in the early sixties and Rawls a decade later. The virtuous circuit obligations-entitlements-rights, which the institutions of present welfare states helped to make crumble, may be restored behind the veil of ignorance. (c) 2005 Elsevier B.V. All rights reserved

The dubious ethics of debt default

This article is an engagement with a piece of Buchanan's on the ethics of debt default, in which Buchanan proved to be surprisingly sympathetic to debt default as an option. Debt default is a current period transfer from bondholders to taxpayers at large. Default cannot then serve to improve, in aggregate, the lot of the generation whose bequest receipts may have been diminished by the use of debt financing. Current generations of taxpayers may have a legitimate complaint against past generations of voters/taxpayers who used debt financing (and reduced their net bequests thereby), but that past generation is beyond the grave and cannot provide recompense

Introduction: Ex Uno Plures. Welfare Without Illusion

Two competing visions of federalism have long held sway. The first is based on the idea of an administrative system of delegation, in which the system of delegations is based on some kind of geographic partitioning of the polity. The second sees federalism as a bottom-up structure in which the larger polity is a construct of the smaller polities of which it is composed. Specifically, the claim is that the effects of federalism cannot be fully understood without consideration of the vision of federalism that the participants in their various roles adopt. One important aspect of the vision is the attitude taken to grants from the central to subsidiary-level governments. On the top-down view, such grants represent simply the judgment that taxes and expenditures are subject to different patterns of optimal decentralization. On the bottom-up view, such grants break what is a critical link between spending and taxing decisions at the level of each sub-national jurisdiction

Polycentric polity: Genuine vs. spurious federalism

Federalism is commonly described in contradictory fashion as involving both competition and decentralization. These descriptions may appear similar on the surface but they emanate from contradictory analytical orientations. Competition entails a polycentric arrangement of competitors where there is no locus of control over the arrangement. In contrast, decentralization is a monocentric arrangement that involves a locus of control. To treat federalism as a method for decentralizing governments leads to a spurious form of federalism because the object that has been identified is not genuinely a competitively organized system of government. Genuine federalism requires a polycentric arrangement that is organized through openly competitive processes. In contrast, the spurious form of federalism allows hierarchy to trump open competition

Public finance, fiscal rules and public–private partnerships. Lessons for Post-COVID-19 investment plans

We explore the distribution of public-private partnerships (PPPs) among the European Union countries, with a special focus on fiscal rules and budgetary constraints while controlling for empirically identified drivers. While offering the opportunity to increase innovation and efficiency in the public sector infrastructure, PPPs allow governments to relax their budget and borrowing constraints. We find that the state of public finances influences the government's choice of PPPs and makes them more appealing for reasons other than efficiency. Stringent numerical rules on the budget balance also foster government's opportunism in the choice of PPPs. On the other hand, high levels of public debt increase the country risk, and discourage private investors from PPP contracts. The results highlight the importance of restoring PPP investment choices based on efficiency criteria and adapt fiscal rules to shield public investment while stabilizing private expectations by means of credible trajectories of debt reduction. The findings contribute to the debate on the role of fiscal rules in fiscal policy and of PPPs in infrastructure financing

Bilevel Comparative Regional Analysis - Performances in Structural Grid

Il metodo proposto mira ad analizzare il contesto regionale europeo (UE 15), in base agli indicatori introdotti nel Rapporto di Primavera 2004, disponibili a livello regionale, e usati a livello europeo per valutare i progressi compiuti dai diversi paesi ed in questo caso per evidenziare le best practises ed identificare gruppi regionali omogenei rispetto ai quali svolgere comparazioni. A tal fine si propone un nuovo metodo di analisi comparativa regionale i.e. Bilevel Comparative Regional Analysis - Performances in Structural Grid (BiCRA-PSG) volto a superare le problematiche di natura comparativa causate dall’eterogeneità delle unità statistiche considerate e alternativa rispetto alle insoddisfacenti proposte fino ad ora adottate.Regional Economic Activity, Comparative Analysis, European Regional policy, Factor Analysis, Cluster Analysis

Public finances and Public Private Partnerships in the European Union

We analyse the Public Private Partnerships (PPPs) in order to account for their uneven distribution among the European Union countries and to identify the motivations of the public actor in selecting PPPs. We focus on the fiscal incentives to overcome budget and borrowing constraints, taking also into account of the political features and institutional frameworks of the countries. Using IMF data over the years 1990-2015, we confirm that the state of public finances impacts on the government’s choice of PPPs: financially constrained governments find the PPP option more attractive due to the possibility of off-balance accounting, while high-debt countries reduce the private investors’ interest in PPP. Fiscal rules increased the PPP bias in the pre-crisis period, while the post-crisis reforms and the increased surveillance seem to better discipline PPP employment. PPPs are, also, confirmed to be under the influence of political competition and government’s preferences for current expenditures

introduction to the jipd special issue on infrastructure

Our intention in assembling this special issue of the Journal of Infrastructure, Policy and Development is to offer a state-of-the-art tour through the political economy issues associated with the provision of public infrastructure, and with the use of Public-Private Partnerships (PPPs) in particular. Anyone who is familiar with PPPs cannot fail to be impressed by the diversity of positions and claims regarding their properties. Some scholars maintain that PPPs are an efficient tool to enhance productivity due to their ability to manage demand-side risk. In contrast, other scholars see in PPPs a scheme whereby the public assumes the risk while the private partner takes the profit

In war as well as in peace: from the displacement effect to incrementalism in public expenditures

The paper will study the trend in public expenditure starting from the Peacock and Wiseman (1961)\u27s contribution known as displacement effect. In our view, the notion of displacement effect is important not for its capability to capture essentials in the mechanisms governing taxing and spending areas in public economy, but rather for what it does not explain: incrementalism in public expenditure. According to Peacock and Wiseman, wars allow governments to drastically increase expenditure without constraining government to go back to the pre-war levels once the war is over. Our main point is that the unbridled increase in public expenditure during the past half century has taken an unfortunate detour under the influence of the theory of incrementalism in public expenditures. The hallmark of this kind of policy is that, at the most, it allows governments to set limits to increases in public expenditures rather than to cut them. One could provocatively say that governments do not need scissors because they have nothing to cut. By bringing in an analysis of the US and some European governments, we demonstrate that there are two related reasons for considering the theory of incrementalism as a key player in the ever increasing public expenditure of a no-war period: an improper extension of the separation of powers to budgets on one hand allowing bureaucracies to actively increase public spending on the other. This incrementalism is responsible for post war systematic deficit financing and concomitant increases in the stocks of public debt