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The Ramsey–Cass–Koopmans model (also Ramsey growth model or neoclassical growth model) is a neoclassical model of economic growth based primarily on the work of Frank P. Ramsey in 1928, [1] with significant extensions by David Cass and Tjalling Koopmans in 1965.
The attempt to combine neo-classical microeconomics and Keynesian macroeconomics would lead to the neoclassical synthesis [30] which was the dominant paradigm of economic reasoning in English-speaking countries from the 1950s till the 1970s. Hicks and Samuelson were for example instrumental in mainstreaming Keynesian economics.
In neo-classical growth models, the long-run rate of growth is exogenously determined by either the savings rate (the Harrod–Domar model) or the rate of technical progress (Solow model). However, the savings rate and rate of technological progress remain unexplained.
The Harrod–Domar model dominated growth theory until Robert Solow [c] and Trevor Swan [d] independently developed neoclassical growth models in 1956. [55] Solow and Swan produced a more empirically appealing model with "balanced growth" based on the substitution of labor and capital in production. [59]
Part of the problem in this debate revolved around the high level of abstraction and idealization that occurs in economic model-building on topics such as capital and economic growth. The original neoclassical models of aggregate growth presented by Robert Solow and Trevor Swan were straightforward, with simple results and uncomplicated ...
The Solow–Swan model or exogenous growth model is an economic model of long-run economic growth. It attempts to explain long-run economic growth by looking at capital accumulation , labor or population growth , and increases in productivity largely driven by technological progress.
The Harrod–Domar model was the precursor to the exogenous growth model. [4] Neoclassical economists claimed shortcomings in the Harrod–Domar model—in particular the instability of its solution [5] —and, by the late 1950s, started an academic dialogue that led to the development of the Solow–Swan model. [6] [7]
The new classical perspective takes root in three diagnostic sources of fluctuations in growth: the productivity wedge, the capital wedge, and the labor wedge. Through the neoclassical perspective and business cycle accounting one can look at the diagnostics and find the main ‘culprits’ for fluctuations in the real economy.