Money, Banks and Finance in Economic Thought

Public credit and the theory of the state

Sturn Richard, University of Graz

In this paper, I am dealing with a German-language tradition offering a third way apart from the Keynesian mainstream and the “classical” view on public debt. This tradition developed a view of public credit based on a comprehensive view of public revenues and expenditures, with public credit as a systemically necessary element, paying due attention to differences in types of expenditure as well as to vicissitudes of the business cycle. It notably included a theory of the state sector, addressing politico-economic problems later cropping up in different ways in Rudolf Goldscheid’s and Joseph Schumpeter’s fiscal sociology and in Knut Wicksell’s “new principle of just taxation” (1896) on the basis of quid-pro-quo. Put another way, this German tradition combined a politico-economic perspective with elements of a “Keynesian” view. Pertinent secondary literature in the history of economic thought does not elaborate much on the nature of this combination. Indeed, public finance retrospectives referring to this tradition from the 1950s and 1960s onward (e.g. Dettweiler 1968) were mostly focused at the “foreshadowing” of “Keynesian” elements in Carl Dietzel’s (1855) seminal work and discussed their subsequent successive moderation by scholars such as Lorenz von Stein and Adolph Wagner. However, relevant elements and backgrounds of the politico-economic dimension of the public sector are discussed in specific ways in two quite different contexts of discussion, apart from typical Public Finance retrospectives, notably (1) the literature on the historical background of public choice theory and (2) influential discussions at the interface of constitutional/public law and political theory, as exemplified by Ernst-Wolfgang Böckenförde’s (1976, pp 146-84) and Carl Schmitt’s (e.g. 1940) writings on Lorenz von Stein. The present paper attempts to look at the Finanzwissenschaft public debt tradition from the different angles afforded by those different strands of literature, bringing to the fore various contextual factors influencing the way in which more technical aspects of public debt are developed and framed.

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Keywords: Public debt, public finance, Carl Dietzel, Lorenz von Stein, Adolf Wagner

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