Public debt and the common good.

This study offers the longest quantitative review of state debt in the literature (1920-90). Drawing on classical themes, institutional analysis is integrated with dimensions of culture to define the parameters of political freedom in a theoretically coherent way. Quantitative analysis supports the essence of the theoretical framework: centralization and injustice or the incapacity for the common good can help explain state indebtedness. Centralization is the primary institutional feature measured in statistical modeling and shown to have a significant, positive relationship with state debt. A unifying classical theme of self-sufficiency allows for different measures of centralization to be seen in a common light. Centralization within a state and the reliance of a state on intergovernmental aid both can be seen as a loss of the self-sufficiency that attends political freedom: the first a measure of less self-sufficient local governments and the second a measure of a state’s tendency to depend on central national authority. Both of these indices have a positive relationship with state debt levels. A synthetic measure of injustice is derived and shown to have a significant, positive relationship with state debt. Also, important cultural measures such as voter turnout and religious composition are integrated in state debt modeling for the first time and shown to have significant explanatory power. Using these variables, this study posits a contribution to public debt theory by offering an explanation in terms of mores for the proclivity to use debt. Injustice can be measured in societal faction and understood as reflective of not only the incapacity for the common good among the living but a lack of common good between the older and younger or between present and future generations. This finding begins to operationalize the moral dimension of Buchanan’s neoclassical argument against public debt as benefitting the present at the expense of the future. Finally, this study posits a contribution to fiscal federalism theory. The market-oriented assumptions undergirding Oates’ Decentralization Theorem do not lend themselves to a variety of contexts as well as the more comprehensive view of political freedom that integrates institutions and mores.