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The Ramsey–Cass–Koopmans model, or Ramsey 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 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.
This model was the precursor to the neoclassical model of economic growth, ... The Burden of the Debt and the National Income, 1944, AER.
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]
In the post-crisis situation of 1929, Keynes judged the assumptions of the free trade model unrealistic. He criticized, for example, the neoclassical assumption of wage adjustment. [92] [93] As early as 1930, in a note to the Economic Advisory Council, he doubted the intensity of the gain from specialization in the case of manufactured goods.
Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model. [1]
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]
RBC theory builds on the neoclassical growth model, under the assumption of flexible prices, to study how real shocks to the economy might cause business cycle fluctuations. [ 7 ] The "representative consumer" assumption can either be taken literally or reflect a Gorman aggregation of heterogenous consumers who are facing idiosyncratic income ...