Ramsey growth model
Overview
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
based primarily on the work of the economist and mathematician Frank P. Ramsey
Frank P. Ramsey
Frank Plumpton Ramsey was a British mathematician who, in addition to mathematics, made significant and precocious contributions in philosophy and economics before his death at the age of 26...
, with significant extensions by David Cass
David Cass
David Cass was a professor of economics at the University of Pennsylvania, mostly known for his contributions to general equilibrium theory. His most famous work was on the Ramsey growth model, which is also known as the Ramsey-Cass-Koopmans model.-Biography:David Cass was born in 1937 in...
and Tjalling Koopmans
Tjalling Koopmans
Tjalling Charles Koopmans was the joint winner, with Leonid Kantorovich, of the 1975 Nobel Memorial Prize in Economic Sciences....
. The Ramsey model differs from the Solow model in that it explicitly models the choice of consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
at a point in time and so endogenizes the saving rate. As a result, unlike in the Solow model, the saving rate may not be constant along the transition to the long run steady state
Steady state
A system in a steady state has numerous properties that are unchanging in time. This implies that for any property p of the system, the partial derivative with respect to time is zero:...
.
