How to pay for the war in times of imperfect commitment: Adam Smith and David Ricardo on the sinking fund

Rodolfo Signorino

The European Journal of the History of Economic Thought, 2016, vol. 23, issue 4, 544-560

Abstract: The paper proposes a comparative analysis of Smith's and Ricardo's views on the sinking fund. It shows that Smith and Ricardo agreed in stressing the ineffectiveness of the sinking fund as a policy instrument targeted at public debt repayment and tax-burden relief, pointing out that its actual workings had paradoxically helped to increase rather than reduce British total debt-load. Moreover, their explanation of the sinking fund paradox integrates a defective fiscal commitment technology with powerful politicians’ incentives to siphon off the money stored in the sinking fund to meet sudden increases of public expenditure whenever the occasion arose.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eujhet:v:23:y:2016:i:4:p:544-560

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DOI: 10.1080/09672567.2014.977319

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