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- Title
ON SOME UNRESOLVED QUESTIONS IN CAPITAL THEORY: AN APPLICATION OF SAMUELSON'S CORRESPONDENCE PRINCIPLE.
- Authors
Burmeister, Edwein; Ngo Van Long
- Abstract
This article focuses on a study which applied the Samuelson's Correspondence Principle, which states that steady-state points that exhibit paradoxical behavior are dynamically unstable in some sense and conversely, in capital theory. The fundamental aspect of the Cambridge controversy we are concerned with in this paper centers on comparisons of alternative steady-state equilibrium positions when the profit or interest rate is varied as an exogenous parameter. For practical economic policy, one cannot expect to solve optimal control problems of the form (1). On the other hand, it is quite reasonable to suppose that an actual economic policy will be implemented if the calculated benefits exceed estimated costs. We have seen that such cost-benefit planning is potentially quite dangerous if it is based upon rate-of-return calculations and the social rate of return is not unique. In this case the economy may move away from the true rest point solution for the appropriate criterion, i.e., for problem (1), if the economy is not regular.
- Subjects
RATE of return; CAPITAL; CAPITAL investments; INVESTMENTS; PROFIT; INTEREST rates
- Publication
Quarterly Journal of Economics, 1977, Vol 91, Issue 2, p289
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1885418