How to pay for the war in times of imperfect commitment: Adam Smith and David Ricardo on the sinking fund. Issue 4 (3rd July 2016)

• Record Type: Journal Article
• Authors: Signorino, Rodolfo
• Is Part Of: European journal of the history of economic thought. Volume 23:Issue 4(2016)
• Page Start: 544
• Page End: 560
• Publication Date: 2016-07-03
• Subjects: Adam Smith -- David Ricardo -- Ricardian equivalence -- sinking fund -- imperfect commitment; B12 -- B22; Economic history -- Periodicals; 330.94
• DOI: 10.1080/09672567.2014.977319
• Languages: English
• ISSNs: 0967-2567

Abstract

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.