Why did the British government unfailingly honor its debts in the eighteenth century while the French government did not? How might the answers to this historical question help us to answer the important contemporary question of why some governments pay their debts while others renege on them? These are the two broad questions that David Stasavage ponders in this book. As a political scientist who believes in the predictive value of game theory, it is probably fair to say that he is ultimately more interested in the second question than he is in the first. Historians are of course a stubbornly skeptical lot who generally see little or no predictive value in the work they do and neither know nor care about game theory. As such, they will likely pay little attention to Stasavage's more contemporary arguments and skip the theoretical sections of his book altogether.

So why does this book merit a review in these pages? Because its nontheoretical sections will indeed be of interest to students of eighteenth-century Britain and France for the additional light they shed on the (already pretty well illuminated) public credit arrangements that obtained in those two kingdoms. Thanks to the work of P. G. M. Dickson, Patrick O’Brien, John Brewer, and others, one of the very few premises of recent historical scholarship devoted to the “long” eighteenth century that now seems incontestable is the supremacy of British public finance. The relative creditworthiness of the British state was the most potent weapon it had in its arsenal during the second hundred years' war with France, as this enabled it to borrow the massive sums necessary to finance war on a broad scale over very long stretches of time. Above all else, it was parliamentary control of taxing and spending that made the Georgian military juggernaut a sound investment, as it helped to ensure broad acquiescence in the high-tax regime that was necessary to bring in sufficient revenue to ensure predictable payments to public creditors. Those creditors, in turn, remained not only willing but also eager to lend to the state at comparatively low rates of interest. The Bourbon system of public finance was highly inefficient by comparison, riddled with fiscal favoritism, hobbled by a faulty tax structure, and saddled with the high rates of interest on loans that were the inevitable result of the government's tendency to repudiate debts. It is all too tempting to draw a whiggish moral from this tale of French woe. If only France had developed a representative system à l’anglaise, one in which the interests of public creditors had been adequately protected, then Britain would not have enjoyed such a marked fiscal advantage, the two sides would have been much more evenly matched in their geopolitical quarrel, and that quarrel might have ended in a very different way.

Stasavage makes two compelling points that are likely to help inoculate historians against this whiggish morality tale, one of them about what really happened in Britain, the other about what did not and indeed could not happen in France. His point about Britain is that creditworthiness did not issue full blown from the Glorious Revolution. It was, rather, several decades in the making and subject to party-political dispute. Only thirty years after 1688 was the British government able to borrow money as cheaply as the Dutch did, and until 1715 it was the victim of volatile interest rates, which occasionally rose to levels as high as those more routinely charged to the French monarchy. Stasavage's econometric modeling indicates that this volatility was not solely attributable to trends in inflation and fluctuating government demand for funds. It also stemmed from the balance of power between the Whigs and the Tories. Simply put, when the Whigs were in, interest rates tended to be lower; when the Tories were in, they tended to be higher. Nobody who knows anything about the “Rage of Party” will find this surprising, as the Whigs have been noted from their day to this for their devotion to “sound finance” and the Tories for their suspicion of it. But Stasavage's account is useful in showing that these predispositions exerted a measurable influence on the creditworthiness of the British state and, hence, that it was not simply the fact of parliamentary government but the balance of ideological forces within Parliament that helped to determine how creditworthy that state would be.

Stasavage's second important point, about France, is that it is not likely that stronger representative institutions would have made the French state any more creditworthy. In this respect, France could not have been more like Britain, because the balance of political forces was never favorable to public creditors. Had, for instance, the Estates General been convened to deal with the fiscal crisis of 1715 (as it nearly was), the likelihood is that it would have sanctioned default rather than higher taxes and lower interest payments. This was because moneymen would scarcely have been represented in it, while the higher nobility's interest in preserving and extending its fiscal privileges prevented the sort of coalition between creditors and aristocrats that was such a marked feature of the Whig regime in Britain. In 1789–90, moreover, when Necker presented the Constituent Assembly with the opportunity to take a “British” turn in public finance through the establishment of a national bank, deputies opted instead for the creation of a new currency. The notorious assignat was backed by the proceeds from the sale of church lands, and the inflationary spiral that followed from its overissuance amounted to a de facto repudiation of public debt on a massive scale. This outcome, of course, had everything to do with the balance of partisan forces within the Assembly, in which the financial interests most closely associated with a handful of centrist deputies were swept aside in the broader quarrel between left and right.

In short, historians will be reluctant to follow Stasavage in his excursions into game theory and predictive reasoning. But his is nevertheless a worthy contribution to the comparative political economy of the “long” eighteenth century that they will profitably factor into their thinking about it.