Some years ago, when Principal and Professor of Economics at the infant Univer- sity of Buckingham, Britain's only independent university, I was intrigued to receive an application, supported by strong recommendations from a Signora Ilde Rizzo, who wished to take some courses in public finance. As she was already an of Catania, noted for its expertise in the economics of Assistant at the University public finance, my colleagues and I brushed aside her modest request to attend undergraduate courses and enrolled her in our new graduate course. We also hoped that she might, in time, be able to gain experience in teaching and writing in English. Dr. Rizzo exceeded our highest expectations. She presented the first D. Phil thesis ever at Buckingham and defended it with consummate success. This work is a revised and extended version of her thesis, and it is a pleasure to congratu- late Dr. Rizzo on its appearance, and also her publisher for recognizing its qUality. It will come as no surprise to the reader that Dr. Rizzo has already published extensively in Italian and also in English, but this is her first book in the latter language. I am glad to think that Dr.
Rizzo's thesis arose out of our mutual interest in the question as to whether debt financing offered governments a major opportunity for maintaining the growth of public spending.
1. Introduction.- 2. Notes on a Definition of the Concept of Public Debt.- 2.1 Introduction.- 2.2 Analogies between borrowing and unfunded obligations.- 2.3 Differences between borrowing and unfunded obligations.- 2.4 The U.K. pension system case.- 2.5 Economic and policy implications.- Notes.- 3. The Public Debt Perception Issue.- 3.1 Introduction.- 3.2 Public debt illusion: a brief overview.- 3.3 Funded debt perception.- 3.4 Unfunded debt perception.- 3.5 Concluding remarks.- Notes.- 4. The Fulfilment of Unfunded Obligations and the Problem of Population Growth: An Application of Baumol's Law.- 4.1 Introduction.- 4.2 The model.- 4.3 Concluding remarks.- Notes.- 5. Public Choice Implications of Unfunded Debt.- 5.1 Introduction.- 5.2 The median voter theorem and unfunded obligations.- 5.3 Unfunded obligations fulfilment within a median voter framework: a simple model.- 5.4 The effects of the population growth on the level of unfunded obligations fulfillment.- 5.5 The choice of the median voter's optimum contribution rate.- 5.6 Concluding remarks.- Notes.- 6. The Interest Group Theory and Unfunded Obligations.- 6.1 Introduction.- 6.2 Interest groups and the political process.- 6.3 Interest groups and unfunded obligations.- 6.4 Concluding remarks.- Notes.- 7. An Attempt at Empirical Investigation.- 7.1 Introduction.- 7.2 Some preliminary methodological questions.- 7.3 The pension equation: cross-section analysis.- 7.4 The pension equation: time-series analysis.- 7.5 OLS results.- 7.6 Concluding remarks.- Notes.- 8. Conclusions.