Study week on the econometric approach to development planning

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Monograph

Identifikator:: 1824422792

URN:: urn:nbn:de:zbw-retromon-217476

Document type:: Monograph

Title:: Study week on the econometric approach to development planning

Place of publication:: Amsterdam [u.a.]

Publisher:: North-Holland Publ. Co. [u.a.]

Year of publication:: 1965

Scope:: XLVII, 1259 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: On the concept of optimal economic growth / Tjalling C. Koopmans, Cowles Foundation for research in Econimics at Yale University New Haven, Conn. - U.S.A.

Collection:: Economics Books

SEMAINE D'ÉTUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIQUE ETC. 205 Prof. KooPMANS’ « golden rule path »), the rate of interest of the economic system is determined independently of consumers’ utility functions. This theorem follows from Prof. KooPMANS’ own analysis. For, on the optimum path, the rate of interest must be equal to the natural rate of growth (which, in the particular case of a stationary economic system, is equal to zero). But this simply means that individuals’ preferences are not a determinant of the optimum rate of interest. It does not mean (as Prof. KooPMANS seems to fear) that any restriction comes to be im- posed on individuals’ preferences. To argue otherwise would sound to me rather similar to saying, in the usual case of a one-period pro- blem of utility maximization, that the fact that market prices are the same for all consumers imposes restrictions on individual prefe- rences. Traditional economic theorists have solved this problem a long time ago, by referring their analysis only to what happens at the margin. Individual preferences are accepted for what they are, however different from one individual to another they may be. Yet, given these preferences, each individual will push the consumption of each commodity to the point at which the ratios of marginal utilities are equal to relative market prices. This means that we can make definite statements about ratios of marginal utilities, without impos- ing any restriction on utility functions. Our case is similar. Consumers’ preferences may be quite dif- ferent at different levels of consumption, at different times, and for different individuals. Any social preference function expressing all these preferences may be equally different; and it must be accepted for what it is, without any restriction. Yet, if behaviour is to be rational, the consumption of each commodity will be distributed over time so as to equate marginal intertemporal rates of substitution in consumption to the externally given rate of interest. This is all we can say. Professor KooPMANS’ results have been obtained because he has added something else. He has imposed on utility functions at all levels (and not only at the margin!) the restriction that utility always differs by ¢ at anv two adjacent points of time. This restriction is 4, Koopmans - pag. 69

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