Talk:Ricardian equivalence

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controversial[edit]

"it is controversial whether the idea has any relevance for actual modern economies." -- Oh really? While RE itself is controversial, there are many prominent economists who think it is very relevant! Can we rephrase this? Asacarny 05:00, 12 October 2005 (UTC)

Name for the effect[edit]

Why is it called Barro-Ricardo equivalence proposition, not Ricardo-Barro, given that Robert Barro came up after David Ricardo? Samnikal 12:49, 24 May 2006 (UTC)

Probably because Barro extended the idea, his name is first alphabetically, and Barro-Ricardo is the common usage. The Land 12:53, 24 May 2006 (UTC)
Barro didn't even mention Ricardo in his first paper (1974). If Barro proved a theorem in that paper, it would have been Barro Equivalence Theorem. Barro credits Ricardo later, in 1979. Ricardo never proposed it as a theorem, as far as I can tell. So it's really about Barro marrying himself to a theorem that Ricardo only flirted with as a "proposition". The literature goes back and forth between "equivalence proposition", "equivalence theorem", and plain old "equivalence". Maybe it should be the Ricardo-Barro Ambivalence Proposition? Yakushima (talk) 07:33, 25 May 2010 (UTC)

Name of the effect: Ricardian equivalence is NOT the same as Ricardian rent, as is stated in the first line of the item. See the Wiki entry for Ricardian Rent. The words Ricardian Rent" should be deleted. —Preceding unsigned comment added by 130.130.37.13 (talk) 07:02, 19 June 2008 (UTC)

The critiques offered on Barro by Feldstein and Buchanan were both published in 1976, yet Barro's piece is cited to have been published in 1979. —Preceding unsigned comment added by 137.205.222.236 (talk) 10:56, 21 April 2009 (UTC)

Questionable Logic[edit]

I've no external knowledge of Ricardo, but the description provided seems logically unsound in a manner that would cause it to be rejected out of hand. This makes me hope that I'm misunderstanding and that, therefore, the summation could stand improvement. "Since bonds are loans, they must eventually be repaid—presumably by raising taxes in the future." I can name at least three other ways off the top of my head: that the current returns on those loans are greater than the interest; that deflation is imminent; or, that the current loans, properly invested, will produce greater revenues in the future at the same tax rates. The latter is the subject of much current debate, but the second and first seem to be universally held. Can anyone wise in the ways of Ricardo explain? Czrisher (talk) 22:51, 9 February 2011 (UTC)

I think that the answer to this question is that Ricardo was discussing war bonds which are bonds raised specifically for consumption spending. In the more general case you may well be right. -- Derek Ross | Talk 01:21, 17 December 2013 (UTC)

Introduction[edit]

The introduction section lays out two possibilities:

Governments can finance its expenditure either through taxes or by issuing bonds. Since bonds are loans, they must eventually be repaid—presumably by raising taxes in the future. The choice is therefore "tax now or tax later."

However there are actually three possibilities so it would make more sense to say:

Government can finance its expenditure either through taxes, by issuing bonds, or through seignorage. Since bonds are loans, they must eventually be repaid — presumably by raising taxes in the future. The options are therefore "tax now, tax later, or tax never."

Unfortunately this would destroy the logical structure of the rest of the article which is predicated on there being only two possibilities. So I hesitate to make the change. The article really needs to be changed in such a way that it points out that there are three options but that the argument for Ricardian equivalence assumes that there are only two. -- Derek Ross | Talk 01:16, 17 December 2013 (UTC)

Note by user Luzius: Ricardian equivalence is normally discussed in models without explicit monetary units. In such contexts, seignorage cannot exist. Furthermore, in a perfectly efficient market, seignorage would not make a material difference. Adding 10% to the money supply would just increase all prices by 10%, thus being equivalent to a tax on cash holdings. To conclude: seignorage should not be included here. In the Ricardian context, this is just a form of taxation. — Preceding undated comment added 11:49, 20 July 2015 (UTC)

Structure and body need some improvement.[edit]

As a relative ingenu in economics, perhaps I'm lacking some key knowledge or insight, but nonetheless the following seem contradictory:

  "This leads to the result that, for a given pattern of government spending, the method of financing that spending does not affect agents' consumption decisions..."  

Followed by, several lines later:

  "According to the hypothesis, taxpayers will anticipate that they will have to pay higher taxes in future. As a result they will increase their savings to pay the future tax increase; i.e. they reduce their current consumption to do so."

So which is it? Does the pattern of government spending influence consumption spending or not? If in fact this is not contradictory, some further explication would be helpful. By chance, is the first phrase perhaps resting on the understanding that in time those additional savings will be spent, thus *over time* consumption decisions are not affected?

Also, the phrase further down:

   "In 1974, Robert J. Barro provided some theoretical foundation for Ricardo's hesitant speculation[4] (apparently in ignorance of Ricardo's earlier notion and De Viti's subsequent extensions)."

I note the footnotes, but it would be helpful to provide some clue in the body as to what Ricardo's "earlier notion" was, as well as some illumination of the crux of De Viti's "subsequent extension." The way it reads now, this sentence seems as if it was lifted out of a larger text somewhere, while the necessary context was left behind...

Kenwg (talk) 01:17, 21 July 2015 (UTC)

Saving for taxes?[edit]

To put it simply, could this be an example: After submitting your federal taxes, you get a refund check for $100. You anticipate paying $150 on your county taxes, due later in the year. You deposit the $100 check into a savings account you earmarked for those forthcoming county taxes and withdraw that, along with the other saved money, to pay the county taxes when they come due. Ricardian equivalence or not? USN1977 (talk) 22:12, 28 October 2017 (UTC)