Can there be such a thing as legitimate public debt in democracy? De Viti de Marco and Buchanan compared

The chapter explores the background of public debt theory by contrasting the Anglo-Saxon tradition as embodied in the Ricardian (1821) equivalence theorem and the Italian tradition as embodied in de Viti de Marco’s (1893, 1898) non-equivalence theorem. Moreover, it highlights the key role that de Viti de Marco played in inspiring Buchanan’s (1969) theory of public debt. Specifically, it concentrates on the quality of public expenditures in a contractarian constitutional setting and asks whether, under certain budget conditions, debt financing can be justified. An effort is made at exploring the rationale for explaining the genesis of this apparently biased view and attention is drawn to how de Viti’s distinction between productive and unproductive expenses has an impact on both the ethics of debt and the ethics of default.