Retail sales in Britain unexpectedly fell last month as consumers started tightening their belts ahead of the government’s austerity measures,
Fascinating. So, people do react now to future changes in income. Ricardian equivalence holds.
But, just at the time that we so obviously needed an economic stimulus
Therefore economic stimulus won\’t work because people do react now to future changes in income and Ricardian equivalence holds.
Now, as it happens, I don\’t think that Ricardian Equivalence does hold, certainly not for all people for all even foreseen changes in future income.
But it is something of an oddity to use proof of equivalence holding as proof that we should follow a course of action that won\’t work precisely because equivalence holds.