Home » Economic Models » Lars P Syll on Picketty and ”Ricardian Equivalence”

Lars P Syll on Picketty and ”Ricardian Equivalence”

I repost today here Lars P. Syll’s on the current interesting and important topic raised by the french Economist Thomas Piketty. I wouldn’t state completely my position here on the topic. Of interest  to further enrich the debate is the apparent dichotomy between what the structure of economic models might recommend us to follow,  on the one hand what underlying reality appers to reveal,  specifically Lars’s interpretation that representative agents models point to the true role for Public Debt as a redistributive device (Ricardian Equivalence) that seems to be clear, and on the other Lars’s own interpretation. Certainly other views on this exist and with argumentative validity…

” For far too long, economists have neglected the distribution of wealth … partly because of the profession’s undue enthusiasm for simplistic mathematical models based on so-called representative agents …


By totally avoiding the issue of inequality in the distribution of wealth and income, these models often lead to extreme and unrealistic conclusions and are therefore a source of confusion rather than clarity. In the case of public debt, representative agent models can lead to the conclusion that government debt is completely neutral, in regard not only to the total amount of national capital but also to the distribution of the fiscal burden. This radical reinterpretation of Ricardian equivalence … fails to take account of the fact that the bulk of public debt is in practice owned by a minority of the population … so that the debt is the vehicle of important internal redistributions when it is repaid as well as when it is not.”


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