ABSTRACT
This chapter discusses the hypothesis that both John Maynard Keynes and many of his critics focused on the wrong aspects of the German reparation problem, and that their fallacies partly explain the failure of reparation policies towards Germany. It argues that the German reparation question was a problem, not so much for a lack of capacity to pay but rather of a lack of willingness to pay. The chapter presents the sovereign-debt reasoning in an intuitive way and places it in contemporary perspective. It examines the various different reparation regimes that dominated the German economy between 1920 and 1934, focusing on the incentive effects they created for German policy making. The chapter concludes with some reflections on the possible consequences that Keynes well-meaning critique of the reparation problem may have had for the evolution of the reparations question and its political consequences over time.
