WHY IS OPTIMAL GROWTH THEORY MUTE? RESTORING ITS RIGHTFUL VOICE

2018 ◽  
Vol 22 (1) ◽  
pp. 77-100
Author(s):  
Olivier de La Grandville
Keyword(s):  
Utility Function ◽  
Technical Progress ◽  
Competitive Equilibrium ◽  
Traditional Approach ◽  
Optimal Growth ◽  
Growth Theory ◽  
Reasonable Time ◽  
Future Evolution ◽  
Concave Utility Function ◽  
Central Economic

Optimal growth theory as it stands today does not work. Using strictly concave utility functions systematically inflicts on the economy distortions that are either historically unobserved or unacceptable by society. Moreover, we show that the traditional approach is incompatible with competitive equilibrium: Any economy initially in such equilibrium will always veer away into unwanted trajectories if its investment is planned using a concave utility function. We then propose a rule for the optimal savings-investment rate based on competitive equilibrium that simultaneously generates three intertemporal optima for society. The rule always leads to reasonable time paths for all central economic variables, even under very different hypotheses about the future evolution of population and technical progress.

MACROECONOMIC DYNAMICS SURVEY: ENDOGENOUS GROWTH THEORY AND MODELS: THE “FIRST WAVE,” 1952–1973

2017 ◽  
Vol 22 (6) ◽  
pp. 1695-1720 ◽  
Author(s):  
Stephen E. Spear ◽  
Warren Young
Keyword(s):  
Endogenous Growth ◽  
Technical Progress ◽  
Imperfect Competition ◽  
Competitive Equilibrium ◽  
Increasing Returns ◽  
Growth Theory ◽  
American Economic Association ◽  
Macroeconomic Dynamics ◽  
Endogenous Growth Theory ◽  
Economic Association

This paper surveys the first stage in the development of models of endogenous growth over the two decades between 1952 and 1973, including seminal works by Arrow, Frankel, Phelps, Uzawa, and others as faculty and graduate students who interacted in the Stanford–Chicago–MIT–Yale Nexus. The paper also deals with American Economic Association (AEA) and Econometric Society (ES) conference sessions over the period 1964–1968 on growth, technical progress, and innovations and with the contributions in the 1967 Shell volume, in addition to dissertations, working papers, and book chapters by those involved in the “first wave” over the period 1965–1973. Finally, the paper considers the initial efforts at building more sophisticated models based on technical progress, human capital, increasing returns and imperfect competition, and the incompatibility between increasing returns with competitive equilibrium.

scholarly journals External Habits Formation and the Environment

2021 ◽  
Vol 67 (1) ◽  
pp. 1-12
Author(s):  
Fatma Safi
Keyword(s):  
Utility Function ◽  
Environmental Quality ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Competitive Equilibrium ◽  
Cohort Size ◽  
Overlapping Generations Model ◽  
The Impact

Abstract The present paper presents a standard overlapping generations model with external habits formation and environmental quality in the utility function. Our main objective is to study the impact of external habits on capital accumulation and environmental quality on the intertemporal competitive equilibrium. We notice that striving for status leads to environment worsening and capital increasing when the cohort size is large.

OPTIMAL GROWTH THEORY

2010 ◽  
pp. 175-176
Author(s):  
Olivier de la Grandville
Keyword(s):  
Optimal Growth ◽  
Growth Theory

scholarly journals The Utility Concept Applied to the Theory of Insurance

1961 ◽  
Vol 1 (5) ◽  
pp. 245-255 ◽  
Author(s):  
Karl Borch
Keyword(s):  
Utility Function ◽  
Traditional Approach ◽  
Probability Of Ruin ◽  
Utility Concept ◽  
Actuarial Mathematics ◽  
Mathematical Relation ◽  
Degree Of Stability ◽  
A Company ◽  
Maximum Retention

In some recent papers ((1), (2) and (3)) about reinsurance problems I have made extensive use of utility concepts. It has been shown that if a company follows well defined objectives in its reinsurance policy, these objectives can be represented by a utility function which the company seeks to maximise. This formulation of the problem will in general make it possible to determine a unique reinsurance arrangement which is optimal when the company's objectives and external situation are given.More than 50 years ago Guldberg (4) wrote (about the probability of ruin): “Wie hoch diese Wahrscheinlichkeit gegriffen werden soil, muss dent subjektiven Ermessen oder von Aussen kommenden Bedingungen überlassen bleiben”. This is the traditional approach to reinsurance problems. It does obviously not lead to a determinate solution. Most authors taking this approach conclude their studies by giving a mathematical relation between some measure of “stability”, such as the probability of ruin, and some parameter, for instance maximum retention, to which the company can give any value within a certain range. Such studies do usually not state which particular value the company should select for this parameter, i.e. what degree of stability it should settle for. This question is apparently considered as being outside the field of actuarial mathematics.

Kaldor's Growth Theory

1992 ◽  
Vol 14 (1) ◽  
pp. 36-54 ◽  
Author(s):  
Nancy J. Wulwick
Keyword(s):  
Growth Model ◽  
Technical Progress ◽  
Growth Models ◽  
Increasing Returns ◽  
Growth Theory ◽  
Solow Model ◽  
Solow Growth Model ◽  
Policy Interventions ◽  
Long Run ◽  
Endogenous Technical Progress

The last decade has seen an outburst of growth models designed to replace the conventional Solow growth model, with its exogenous trend of technical progress, by more realistic models that generate increasing returns (to labor, capital and/or scale) as a result of endogenous technical progress. In contrast to the Solow model, the new models suggest that policy interventions can affect the long-run rate of economic growth. Nicholas Kaldor's growth model, designed in the late 1950s and early 1960s to replace the Solow growth model, is a precursor of the new growth models.

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