neoclassical growth theory
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by
Steven
N.
Durlauf
and
Lawrence
E.
Blume
Alternate versions available:
1987 Edition
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Abstract
Neoclassical growth theory is mostly that of the equilibrium of a competitive economy through time. It stresses capital accumulation, population growth and technical progress. It distinguishes momentary equilibrium (when the capital stock, the working population and technical know-how are fixed) from long-run equilibrium (when none of these elements is given). Long-run equilibrium is not a sequence of momentary equilibria, since it embodies the rational expectations of agents. The theory has little to say about the ‘animal spirits’ that may determine an economy's potential growth rate, but provides a good base camp for sallies into the study of particular economies.
Keywords
accumulation of capital; animal spirits; Arrow, K. J.; capital–labour ratio; classical saving function; Cobb–Douglas functions; convergence; duality; elasticity of substitution; expectations; factor–price frontier; Hahn, F. H.; Harrod, R. F.; investment behaviour; Kaldor, N.; Keynes, J. M.; knife-edge problem; liquidity trap; long-run equilibrium; Lucas, R.; Meade, J. E.; Modigliani, F.; momentary equilibrium; natural and warranted rates of growth; neoclassical economics; neoclassical growth theory; new macroeconomics; overlapping generations; population growth; proportional savings assumption; rational expectations equilibrium; Robinson, J. V.; Samuelson, P. A.; savings; Solow, R.; steady-state equilibrium; technical progress; technical progress function; unemployment; von Neumann, J.; warranted path; Wicksell effect
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See Also
How to cite this article
Hahn, F.H. "neoclassical growth theory." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 03 March 2016 <http://www.dictionaryofeconomics.com/article?id=pde2008_N000040> doi:10.1057/9780230226203.1170