Thursday, April 29, 2004 | 12:00 AMNowadays, the idea that the way a country borrows its money is connected to what kind of government is has comes as a surprise to most people. But in the 18th century it was commonly accepted that public debt and political liberty were intimately related. In A Free Nation Deep in Debt, MacDonald explores the connection between public debt and democracy in the broadest possible terms. He starts with some fundamental questions: Why do governments borrow? How do we explain the existence of democratic institutions in the ancient world? Why did bond markets come into existence, and why did this occur in Europe and not elsewhere?