Remember
that economics is a social science where we attempt to explain and predict
behavior. Economics operates within an institutional framework, that is,
the laws, conventions, mores, rules and regulations of a society. I would
assert that virtues play a role in individual economic
decision-making. Consider the following excerpt from a history book:
The Great Queen: 1558 - 1603
"For
the English government itself was poor…Elizabeth seldom levied direct taxes,
and she took only L36, 000 in customs dues. Ordinarily she relied on
income from Crown lands, on grants in aid from the English Church, and on
"loans" from the rich, which were practically compulsory but
punctually repaid…She honored the debts left by her father, her brother, and
her sister, and acquired such a reputation for solvency that she could borrow
money at Antwerp at 5%, while Philip II of Spain at times could not borrow at
all."
The Age of
Reason Begins, Will and
Ariel Durant, p. 7
What are the long-term implications
of a country defaulting on a loan?