Public debt has a social utility

Public debt is often seen as an anomaly that must be corrected, the idea being that a high public debt crowds out private sector borrowing and investment. But it is important to not overlook that public debt has a social utility, for several reasons: If the private sector has a very high savings rate, which is the case today, public debt prevents the private sector from making inefficient investments; Public debt provides a risk-free asset needed by savers and investors, especially when uncertainty is high; Public debt provides a liquid asset, which is useful for investors and banks. When estimating the optimal quantity of public debt, these positive effects of public debt on well-being must be taken into account. .