The Economics Book

IN CONTEXT

FOCUS

Economic policy

KEY THINKER

David Ricardo (1772–1823)

BEFORE

1799 Britain introduces income tax during war with revolutionary France. Public debt approaches 250 percent of national income.

AFTER

1945 Following World War II, government spending, taxation, and borrowing rise in developed economies to meet new welfare commitments.

1974 US economist Robert Barro revives the idea of Ricardian equivalence, which says that people spend in the same way regardless of whether their government taxes or borrows.

2011 The European debt crisis intensifies, sparking debate about the limits of taxation and public borrowing.

Should government spending be ...