ABSTRACT
Robert Barro (1974) seeks to argue the failure of deficit spending to expand aggregate demand by interpreting saving according to Keynes as non-consumption. James Buchanan (1976) subsequently claims David Ricardo’s parentage for Barro’s argument, which Barro (1989) accepts. However, savings are spent to acquire interest- and/or dividend-earning financial assets and are thus consumed. The failure of expansionary (pure) fiscal policy for a closed economy thus should be explained differently. Furthermore, Ricardo argued the relevance of the contemporaneous equivalence of taxation and debt financing of government spending, not the inter-temporal equivalence in Barro’s formulation as tax-payers’ behavior. This chapter explains the arguments I have summarized.
