The Ricardian Nonequivalence Theorem

Robert Barro has recently reopened the public debt controversy. He argues that taxation and public debt are equivalent in effects. James Buchanan criticized Barro for ignoring earlier literature, especially Ricardo. Buchanan saw Barro as following Ricardo's reasoning. While Buchanan's interpretation of Ricardo is the orthodox one, this note argues that it is erroneous. Ricardo in fact denied that taxation and public debt are equivalent. The "Ricardian Equivalence Theorem" is, consequently, a misnomer, largely because Ricardo was not a Ricardian on this issue. Rather, Ricardo enunciated a nonequivalence theorem.