Ricardo on the Public Debt: Principle Versus Practice

The technical problems surrounding the so-called "Ricardian Equivalence Theorem" are interesting and important, and have been the subject of a debate in the literature (Barro 1974; Buchanan 1976; O'Driscoll 1977). However, Ricardo's actual position on the public debt is a related problem of some interest, albeit one which has been relatively neglected. Ricardo's behavior with respect to the public debt is relevant for at least two major reasons. From 1819 to his death in 1823, Ricardo was a member of the House of Commons, where he was called upon to vote on matters concerning government finance and where he devoted considerable time and energy to speaking on the issue of public debt. His behavior is also relevant in another context. Prior to his term of office in Parliament, Ricardo was one of the largest loan contractors in Britain and hence one of the leading creditors of the British government.