Ramsey Growth Model
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See: Frank P. Ramsey, Economic Growth Model, Solow–Swan Economic Growth Model.
References
2009
- (Wikipedia, 2009) ⇒ http://en.wikipedia.org/wiki/Ramsey_growth_model
- The Ramsey growth model is a neo-classical model of economic growth based primarily on the work of the economist and mathematician Frank P. Ramsey. The Ramsey model differs from the Solow model in one crucial respect: it explicitly models the consumer side and endogenizes saving. As a result, unlike the Solow model, the saving rate in general is not constant and the convergence of the economy to its steady state is not uniform. Another implication of the endogenous saving rate is that the outcome in the Ramsey model is necessarily Pareto Optimal or that the saving rate is at its golden rule level. It should be noted that originally Ramsey set out the model as a central planner's problem of maximizing levels of consumption over successive generations. Only later was a model adopted by subsequent researchers as a description of a decentralized dynamic economy.