Optimum Saving and Growth: Harrod on Dynamic Welfare Economics

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract. In the 1960s and 1970s Harrod shifted the emphasis of his research in economic dynamics from the study of business cycles (instability principle) to the investigation of the growth process. As part of that, he restated his concept of the natural growth rate as an optimum welfare rate. The present paper examines Harrod's dynamic welfare economics, built around his concept of optimum saving developed as a reaction to Ramsey's approach to capital accumulation. It is shown that, according to Harrod, the saving rate does not affect the long-run growth rate of per capita income, which is determined by technical progress. Moreover, the economy will grow at the natural (full employment) rate only if economic policy is able to bring saving to its "optimum" level in macroeconomic equilibrium. Harrod's interest in optimal growth was motivated by his double concern with growth policy in mature economies and economic development in poor countries. Terms of use: Documents in JEL classification. B22, O10

Tinbergen on the Theory and Policy of Economic Development

“…Tinbergen (1956b) had provided the first formal treatmentfollowed by his 1960 Econometrica article-of that difficult analytical issue since Frank Ramsey's famous 1928 essay on optimal saving. Indeed, by the late 1950s and until the late 1960s the theme of optimal growth attracted much attention, now in the context of the Solovian version of neoclassical growth modelling and of Dorfman, Samuelson, and Solow's (1958) turnpike theorem, together with some incursions by nonneoclassical economists such as Roy Harrod (see Boianovsky and Hoover 2014, 212-214;Boianovsky 2017).…”