Ricardian Equivalence, Freudian Screen Memory and Keynes on the Long Term Problem of Full Employment

The econoblogosphere has erupted -- here, here, here and here -- in a flurry of contention over an abstract concept "absurd idea, with not a shred of evidence or logic to support it" that has nothing to do with employment but that purports to have something to do with full-employment policy. Mr. Keynes had the foresight to observe that in the long-run we are all dead. He forgot to mention that in the meanwhile economists will have redefined "the long run" as equivalent to "at all times", death as equivalent to life, hypertrophy as equivalent to euthanasia and amnesia as equivalent to deliberation.

The elephant in this "Ricardian Equivalence" room that must not be named is J.M. Keynes himself who clearly specified that he regarded "the investment policy" (fiscal stimulus) as "ONLY ONE particular application of an intellectual theorem [emphasis added]." Furthermore, he regarded investment policy as  "first aid" and viewed the other two applications of the theorem, income redistribution and work-time reduction, as essential ingredients for the ultimate cure. The debate about Ricardian Equivalence is nugatory in that it fails to acknowledge and either affirm or refute Keynes's view on the long-term role and limitation of fiscal stimulus in promoting full employment.