Richard Musgrave (1959): “The government is never forced to borrow in the market or to maintain and service outstanding debts.”

econoblog101

When I speak to other economists about how money and fiscal spending work, I often get strange looks: if what I say is true, than economists would have taught something that is wrong for the last couple of decades! That must be impossible. If I could name some historical sources to back up my claims? For the description of endogenous money I then refer to Knut Wicksell (and Irving Fisher), and when it comes to the deficit and public debt I refer to Abba Lerner’s Functional Finance. Now I have an even better source: non other than Richard Musgrave, the grandfather of public finance! Here is a paragraph from his 1959 book “The Theory of Public Finance” (International Student Edition), page 582:

Criteria of Policy

The government is never forced to borrow in the market or to maintain and service outstanding debts. There is always the option of…

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