Who among the following first argued that in the face of high deficits, people save more?

The correct answer is David Ricardo.

David Ricardo (1772–1823) was a classical British economist who first formally articulated the idea that when a government runs high fiscal deficits, rational, forward-looking individuals tend to increase their personal savings in anticipation of future tax burdens. This concept is today known as Ricardian Equivalence.

Understanding the Core Idea — Step by Step:

Step 1: The Government's Budget Constraint
When a government spends more than it collects in taxes, it runs a budget deficit. To finance this deficit, the government borrows money — typically by issuing bonds or securities in the financial market.

Step 2: The Intertemporal Logic
Ricardo argued that government borrowing today is essentially deferred taxation. The government will have to repay this debt in the future, which means it must raise taxes at some point down the road. So, a deficit today = higher taxes tomorrow.

Step 3: Rational Household Response
If people are rational and forward-looking, they anticipate these future tax increases. As a result, when the government cuts taxes today (and finances the shortfall through borrowing), households do not go out and spend the extra money. Instead, they save more — exactly enough to pay the higher taxes they expect in the future.

Step 4: The Net Effect on the Economy
Because private savings rise by exactly the same amount as the government's deficit, the total (public + private) level of national savings remains unchanged. This implies that:

\text{Increase in Private Saving}=\text{Government Deficit}

Thus, deficit-financed tax cuts have no net stimulative effect on aggregate demand, because the increased disposable income is entirely saved rather than spent.

Why the Other Options Are Incorrect:

• Amartya Sen — Nobel laureate known for welfare economics, capability approach, and development economics. He did not originate this argument.
• Esther Duflo — Nobel laureate (2019) known for her work on poverty alleviation and randomised controlled trials in development economics. Entirely unrelated to this concept.
• Adam Smith — The father of modern economics, best known for The Wealth of Nations (1776) and the concept of the "invisible hand." He did not formally propose Ricardian Equivalence.

Summary:
David Ricardo was the first economist to argue that high government deficits lead rational people to save more, because they foresee future tax obligations needed to repay that debt. Although the idea was later formalised and popularised by economist Robert Barro in 1974, it carries Ricardo's name — Ricardian Equivalence — in recognition of his original insight.