Chapter

Growth in Private and Command Economies

Dipankar Dasgupta

in Modern Growth Theory

Published in print November 2010 | ISBN: 9780198069966
Published online October 2012 | e-ISBN: 9780199080458 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780198069966.003.0002
Growth in Private and Command Economies

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This chapter describes a fully planned economy and examines the optimal path a planner will choose. It introduces elements of control theory, an important mathematical tool employed by modern growth theory, and discusses the notion of a dynamic equilibrium over time as well as an equilibrium balanced growth path for an economy. It analyses the private economy and compares it with the command economy in terms of growth paths, presents a compact version of the necessary conditions in terms of the Hamiltonian function, and considers the optimal path of capital accumulation for the command economy. It also examines the optimal rate of saving, the discounted sum of population weighted utilities from per capita consumption, balanced growth, optimal balanced growth paths, the Golden Rule of accumulation, balanced growth equilibrium path, and irreversible investment.

Keywords: private economy; command economy; optimal balanced growth paths; control theory; dynamic equilibrium; equilibrium balanced growth; Hamiltonian function; saving; irreversible investment; accumulation

Chapter.  22398 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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