The Golden Rule of Accumulation under Alternative Savings Assumptions

IN the early 1960s several economists enunciated a result called 'the neoneo-classical theorem' or 'the golden rule of accumulation' (GR). This is the proposition that consumption per head is maximized on a steady state path along which the rate of profit is equal to the rate of growth. In the contest of the neoclassical one-commodity model it was left to Koopmans and Phelps to elicit the rather limited optimality implications of the GR. They established that paths along which the capital to labour ratio remains permanently bounded above the GR value are inefficient in the sense that...