SigmatheZeta
Senior Member
- Joined
- Nov 5, 2021
- Messages
- 615
- Gender
- she/her
- Basic Beliefs
- Generally, I am rooted in both ancient Epicurean and ancient Pyrrhonist sentiments, although I am somewhat sympathetic toward the intentions behind ancient Cynicism.
@Canard DuJour
Okay, I decided to do some digging of my own.
I found this:
However, there have also been cases where a Ricardian equivalence actually was discovered in real world scenarios, and here is one example:
Now, my question to you is this: is there really a scientific consensus regarding RET? I see what seems to be legitimate research that both supports and refutes RET. Is it possible that Ricardian equivalence actually does occur in some cases but does not occur in others?
This is one of the reasons why I have come to believe that I do not really know enough about economics to really make vast sweeping opinions about the subject. It sometimes seems like I have found a well-supported theory, but then I run across evidence that it might not be so very well-supported.
As far as I can decipher from all of the research, though, it seems like redistribution of wealth actually works best in undeveloped cultures where the wealth is not currently controlled by people that are able to make the most efficient use out of it.
The place where I grew up, for example, was controlled by a large number of inbred degenerates leftover from decayed Southern gentry. They are clinging to land that they do not need for reasons more related to pride than to any intention of ever making use of it. They intentionally undermine the advancement of the area because they see any kind of progress at all as a threat to their way of life, which is based primarily upon idleness, animal-murder, and alcoholism. I have seen this phenomenon first-hand. In a situation like that, I think that the forcible redistribution of wealth really could awaken an economy that has utterly failed to develop.
From the University of Würzburg study, they explain it thusly:
I am glad to find that what I observed with my own eyes is validated by somebody. In fact, it says pretty much the same thing I said.
At minimum, @Canard DuJour, I believe that I am justified in saying that the redistribution of wealth is disproportionately beneficial to economies that have failed to develop, due to the, due to the little capital in those economies being controlled by economically and culturally sedentary families.
Therefore, even if the evidence in support of RET is all complete bunk, which I am not sure about but open to depending on what kind of evidence you were to bring forward, the paper still has value. The paper demonstrates very apt arguments for how undeveloped economies really should consider redistribution of wealth in order to get capital into the hands of people that are intent on exerting effort to develop their economies.
*blows smoke-rings* tell me I'm adorable, and feed me more science.
Okay, I decided to do some digging of my own.
I found this:
In this paper, we utilise data from a German population survey to test the validity of the
Ricardian equivalence theorem (RET). In 2013, 2,000 representatively chosen people
were asked whether they have altered their consumption and saving behaviour in
response to the significant increase in public debt that occurred between 2008 and 2012.
Our findings suggest that, in general, RET does not hold. Only 7% of our respondents
reported consuming a smaller proportion of their income, and saving a larger proportion,
in response to public debt accumulation. In the case of respondents required to pay social
security contributions, we can control for their expectations about the future and find
that 36% behave in line with RET. We interpret our findings as microeconomic evidence
in support of the ‘rule-of-thumb’ consumer assumptions employed in macroeconomic
models. Moreover, using multinominal logit regressions, we find that individuals’
consumption responses are significantly related to their economic situation, time
preferences, education, and age.
Suggested Citation: Hayo, Bernd; Neumeier, Florian (2016) : The (In)Validity of the Ricardian
Equivalence Theorem – Findings from a Representative German Population Survey, ifo Working
Paper, No. 233, ifo Institute - Leibniz Institute for Economic Research at the University of
Munich, Munich
However, there have also been cases where a Ricardian equivalence actually was discovered in real world scenarios, and here is one example:
Abstract: Two of the most common measures adopted by the government to stimulate the economy
are increasing government borrowings and implementing tax cuts. These tax cuts are financed
through increased debt. According to the Ricardian equivalence theory, the consumers will not
change their current spending when they anticipate a tax increase in the future. In order to pay
high taxes in the future, the government should increase its present savings. However, the extent of
applicability of Ricardian equivalence could vary across nations. In this context, the present study
explores the long-running relationship between domestic borrowing and private savings in Turkey.
For this purpose, the researcher collected the data for key variables, gross domestic savings, and
government debt, for the period of 1980–2017. The researcher used unit root, cointegration, VECM,
and the Granger causality test to examine the relationships among the variables. Apart from this,
ARDL regression was used in order to examine the long-term relationships among the variables. The
empirical results indicate that there is presence of bidirectional causality, indicating that Ricardian
equivalence is applicable in the economy. Households display a rational behavior by increasing their
savings during the periods in which high government expenditure is incurred.
İkiz, Ahmet S. 2020. "Testing the Ricardian Equivalence Theorem: Time Series Evidence from Turkey" Economies 8, no. 3: 69. https://doi.org/10.3390/economies8030069
Now, my question to you is this: is there really a scientific consensus regarding RET? I see what seems to be legitimate research that both supports and refutes RET. Is it possible that Ricardian equivalence actually does occur in some cases but does not occur in others?
This is one of the reasons why I have come to believe that I do not really know enough about economics to really make vast sweeping opinions about the subject. It sometimes seems like I have found a well-supported theory, but then I run across evidence that it might not be so very well-supported.
As far as I can decipher from all of the research, though, it seems like redistribution of wealth actually works best in undeveloped cultures where the wealth is not currently controlled by people that are able to make the most efficient use out of it.
The place where I grew up, for example, was controlled by a large number of inbred degenerates leftover from decayed Southern gentry. They are clinging to land that they do not need for reasons more related to pride than to any intention of ever making use of it. They intentionally undermine the advancement of the area because they see any kind of progress at all as a threat to their way of life, which is based primarily upon idleness, animal-murder, and alcoholism. I have seen this phenomenon first-hand. In a situation like that, I think that the forcible redistribution of wealth really could awaken an economy that has utterly failed to develop.
From the University of Würzburg study, they explain it thusly:
In early stages of development, op-
portunities for investments in human capital are unequally distributed among households.
In the presence of underdeveloped financial markets, weak public education systems and
high opportunity costs for education, budget constraints are binding and the initial wealth
endowment of the family determines the education level of the children. In this case, re-
distribution as a policy measure to increase equality of opportunities exerts positive effects
on growth.
I am glad to find that what I observed with my own eyes is validated by somebody. In fact, it says pretty much the same thing I said.
At minimum, @Canard DuJour, I believe that I am justified in saying that the redistribution of wealth is disproportionately beneficial to economies that have failed to develop, due to the, due to the little capital in those economies being controlled by economically and culturally sedentary families.
Therefore, even if the evidence in support of RET is all complete bunk, which I am not sure about but open to depending on what kind of evidence you were to bring forward, the paper still has value. The paper demonstrates very apt arguments for how undeveloped economies really should consider redistribution of wealth in order to get capital into the hands of people that are intent on exerting effort to develop their economies.
*blows smoke-rings* tell me I'm adorable, and feed me more science.