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Tuesday, December 02, 2008

Do You Believe?

Bluematter says rational agents shouldn't be struggling right now:

If you believe in Ricardian equivalence, you don't believe in recessions: The same rational, non-credit constrained individual that will save a tax rebate in anticipation of higher taxes in the future is the same rational, non-credit constrained individual that will save something extra in the good times so he can maintain his consumption level unchanged during recessions - as much a certainty in life as death and taxes.

If you believe that fiscal stimuli are pointless, then you don't believe in recessions as we know them.

    Posted by on Tuesday, December 2, 2008 at 12:15 AM in Economics, Fiscal Policy | Permalink  TrackBack (0)  Comments (15)

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