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

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  • Rodolfo Signorino

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.

Suggested Citation

  • Rodolfo Signorino, 2016. "How to pay for the war in times of imperfect commitment: Adam Smith and David Ricardo on the sinking fund," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 23(4), pages 544-560, August.
    • Handle: RePEc:taf:eujhet:v:23:y:2016:i:4:p:544-560
    DOI: 10.1080/09672567.2014.977319
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    References listed on IDEAS

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