what is ricardian equivalence 
ricardian equivalence is an economic theory proposing that the method of financing government spending whether through taxes or debt does not affect the overall economy it suggests that rational consumers will save any extra money from tax cuts to pay for anticipated future tax increases who proposed the ricardian equivalence theory the concept was first introduced by british economist david ricardo in the early 19th century however the modern version of the theory is largely attributed to harvard economist robert barro who formalized and expanded upon ricardo s original ideas in a 1974 paper 