Munich Personal RePEc Archive

Tragedy of Commonly-Shared Debts

Wayne, James J. (2014): Tragedy of Commonly-Shared Debts.

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Abstract

The debates about how to deal with government budget deficits are raging all over the world. In the US, the federal government was forced to shut down for 16 days in October, 2013 because of the failure to pass a budget through congresses, and barely averted a default of federal government obligations due to failure to raise the federal debt ceiling limit. The city of Detroit filed the largest municipal bankruptcy in the US history on July 18, 2013, despite Michigan State constitution’s balanced budget requirement. In Europe, the sovereign debt crisis has dragged down the entire EU economy since late 2009 with no end in sight. In Japan, the government debt to GDP ratio is well over 200%, which is one of the highest in the world. In the world of academics, the debates of government budget deficits have become the key battlegrounds of different schools of thoughts of economics and political ideologies. Economists and political scientists could not even agree to a framework to solve budget deficit problems, and let alone settle these debates. This paper provides a permanent and equilibrium solution to government budget deficits. Surprisingly the solution comes from the first principles of quantum politics. The political equilibrium structure has the time translational symmetry in treating different generations equally. One result of applying physics laws of social science to study the most stable political structure is that the most stable political structure is not only to require the majority voters must deal with minority voters fairly to avoid the tyranny of the majority, but also to require the voting generation must exercise their fiduciary duty to their children and unborn future generations. In terms of government budget deficits, the fiduciary duty means that the current voting citizens must take the full responsible of the current government budget deficits or surplus. The permanent equilibrium solution of government budget deficits is legally and personally held all the voting citizens accountable for the current fiscal surplus and deficit at all levels of governments. In contrast to the balanced budget approaches, the permanent equilibrium solution in this paper allows deficit spending and the accumulation of government debts as long as the government debts must be paid off by the responsible borrowers and voters. This method to solve the government budget deficit problem is an excellent example of applications of law of equilibrium, which can be used to solve economic, political, and other social problems in a value-free way. The permanent solution to government budget deficits presented in this paper is consistent with a different line of reasoning in economics, which is known as the tragedy of the commons. In cases of government budget deficits, the tragedy of fiscal abuse happens because the US Constitution fails to protect interests of the future generations. Through the commonly-shared responsibility for government debts, current voters and their political representatives have financially taken unfair advantage of their children and the future generations, who virtually have no political power.

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