Surely, if Ricardian equivalence can work for the man in the street, it must apply to hyper-rational bond investors who have all the data to hand.

ECONOMIST: The dilemmas facing policymakers

Fathom argues that the higher the ratio of government debt to GDP, the more likely it is that a stimulus will be ineffective and that Ricardian equivalence will apply.

ECONOMIST: The dilemmas facing policymakers

The logic behind this is derived from a theory called Ricardian equivalence, which holds that government spending cannot boost demand, since consumers cut their own expenditure in anticipation of higher taxes ahead.

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Today, Ricardian equivalence between taxes assessed now and those implied by deficits has proven a useful means of comprehending what happened to us during that 24% government-expenditure increase that came coupled with a harrowing real-sector contraction.

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The recent scientific work on the expenditure multiplier is aligned with the Ricardian equivalence theorem as well as the views of the Austrian economists who continued to follow Ricardo even when the Keynesian revolution was ascendant.

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Ricardian equivalence puts theory behind this practice.

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But for Ricardian equivalence to work, individual consumers, who generally prefer watching TV talent contests to genning up on financial news, must not only be aware of the scale of government debt but must also decide to put off buying Nintendo Wiis because of expectations of tax rises.

ECONOMIST: The dilemmas facing policymakers