This addition to the Cambridge series, “Political Economy of Institutions and Decisions,” tries to explain why some governments may create credible commitments toward servicing their debt while other governments fail. A permanent national debt, if it is to promote, rather than crowd out, economic growth, must be serviced faithfully by the government, so that it is willingly held as an asset by the private sector. Somehow, Great Britain accomplished this feat over the course of the eighteenth century and France did not. One result was that Britain defeated France over the course of the Napoleonic Wars; another result was that nineteenth-century Britain experienced a capital intensive Industrial Revolution and France did not.

David Stasavage makes three general, interlocking, arguments to explain the divergent outcomes. First, “constitutional measures establishing multiple veto points may reduce default risk, but they are neither a necessary nor a sufficient condition for this outcome” (p. 14). The problem is that government debt holders are likely to be a minority, and minorities in general have difficulty in maintaining control over any given “veto point” within a political system. This was the case, he argues, for both Britain and France throughout the eighteenth century. Second, “[i]n societies with multiple dimensions of conflict, the process of party formation will reduce default risk provided that government creditors are members of the majority coalition” (p. 17). This is his key argument, as theoretically the political minority of government debt-holders can ally with other groups to form part of a stable majority ruling party and control a veto point in this manner. Such was the role of the Whig party in Great Britain, especially after 1715 and the beginning of the Hanoverian Succession. No comparable set of multiple political conflicts, he argues, existed in France throughout the eighteenth century. Third, “bureaucratic delegation will improve credibility only if government creditors already have influence within a representative assembly” (p. 19). This argument is used to explain the apparent success of the Bank of England in managing the ever-increasing debt of Great Britain over the eighteenth century and to explain why no comparable institution arose in France.

The second chapter lays out the game-theoretic model for these propositions, noting that the model requires decisions to be limited to deciding between two kinds of taxes, on land or on capital. Economic historians will find this an annoying simplification, as it leaves out the role of indirect taxes, whether customs revenues or excise duties, either of which served as the revenue source dedicated to debt service in the successful governments of early modern Europe. Labor is left out of the political game, appropriately enough for this period, which is precisely why it was so heavily taxed, if indirectly through excises and customs. Multiple issues in Britain divided legislators—royal succession, religious tolerance, governance of Scotland, and the relative privileges of landed gentry and urban merchants. France had to deal only with the issue of relative privileges, with the landed gentry holding the important veto point. (French historians may wonder why the regional diversity of France, especially as regards tax liabilities and privileges, did not offer the same possibilities for coalition formation in France as in Britain, at least theoretically.) For readers unfamiliar with the political science literature, the formal exposition is difficult to follow, and even the technical appendix did not help this reviewer—but the logic of the models is clearly explained in the text.

The analytical history chapters then follow. Most interesting is the exercise in chapter 4 to show that interest rates on British government debt were consistently higher when the Tory party held power and fell when the Whigs had control. This is consistent with the more elaborate econometric exercise by John Wells and Douglas Wills (“Revolution, Restorations, and Debt Repudiation: The Jacobite Threat to England's Institutions and Economic Growth,” this JOURNAL 60, no. 2 (2000): 418–41) to show how long it took the effects of the Glorious Revolution of 1688 to show up permanently in British public finance. Comparing France and Great Britain over the second half of the eighteenth century, Stasavage finds that yields on British government debt responded as expected to changes in net borrowing, while yields on French government debt did not. If one had reliable estimates of money supply in both economies, one would likely find that French finances depended as much on increased seigniorage as on increased debt during episodes such as the Seven Years War and the War of American Independence, whereas British finances could be sustained with increased debt and increased taxes.

The concluding chapters then take up the political divisions within first Britain, then France, to solidify his arguments about the importance of the Whig party for creating a viable long-term national debt for Great Britain, and the doomed-to-failure efforts of the French to imitate the British example. French religious cohesion bound the landed nobility together and the interests of the private financiers kept John Law's efforts to set up an independent bank from succeeding, according to Stasavage. But this overlooks the effectiveness of the General Farms in collecting royal taxes after the reforms of Fleury, which was certainly an alternative form of “bureaucratic delegation,” not to mention the rentes of the Hotel de Ville de Paris, which other French cities could have replicated, at least theoretically.

Although of general interest to both political and economic historians for its political economy perspective, this book is written by a political scientist for political scientists. The author's intent is to show political scientists the usefulness of game-theoretic models for rational choices by self-interested legislators. Stasavage's more fundamental contribution may be in showing economic historians how empirical work inspired by the New Institutional Economics can be done effectively by using a blend of methodologies from economics and political science.