Accession Number : AD0704510

Title :   SOME MODELS OF STEADY STATE DYNAMIC EQUILIBRIUM,

Corporate Author : CALIFORNIA UNIV BERKELEY OPERATIONS RESEARCH CENTER

Personal Author(s) : Gale,David

Report Date : DEC 1969

Pagination or Media Count : 38

Abstract : The paper considers three simple two-sector models of production and consumption and studies their stationary general equilibria. The results are the following: in general, the models have exactly two such equilibria the first being the golden age, golden rule equilibrium in which stationary output is maximized, interest rate equals population growth rate and real wage equals output per worker. The second equilibrium called here a sigma-equilibrium because it depends on, peoples propensity to save, has output less than maximum and interest rate either greater than (deflationary) or less than (inflationary) population growth rate. It is characterized by the property that savings and investment are equal (which is not true in the golden age case). The deflationary case is caused by too low a value of sigma(people don't save enough) so that there is too little capital. It is, however, productively efficient. The inflationary case is caused by too much saving leading to 'over-capitalization' and productive inefficiency. In each model it is shown that the inflationary mode is locally stable while the deflationary mode is unstable. (Author)

Descriptors :   (*ECONOMICS, MATHEMATICAL MODELS), MONEY, INDUSTRIAL PRODUCTION, COSTS, POPULATION, EMPLOYMENT, EFFICIENCY

Subject Categories : Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE