http://debianws.lexgopc.com/wiki143/index.php?action=history&feed=atom&title=Dynamic_efficiencyDynamic efficiency - Revision history2026-10-26T17:00:15ZRevision history for this page on the wikiMediaWiki 1.43.1http://debianws.lexgopc.com/wiki143/index.php?title=Dynamic_efficiency&diff=7738988&oldid=previmported>BobKilcoyne: Schumpeterian Hypotheses2024-01-20T20:23:24Z<p>Schumpeterian Hypotheses</p>
<p><b>New page</b></p><div>{{Short description|Concept in economics}}<br />
In economics, '''dynamic efficiency''' is achieved when an economy invests less than the return to [[Capital (economics)|capital]]; conversely, dynamic inefficiency exists when an economy invests more than the return to capital.<ref name=abel /> In dynamic efficiency,<ref>{{Cite web|url = http://agecon2.tamu.edu/people/faculty/mjelde-james/AGECO604/tutorial/dyillustration.htm#Interactive%20Two%20Period|title = Dynamic Efficiency Illustration|website = agecon2.tamu.edu|access-date = 2016-05-03}}</ref> it is impossible to make one generation better off without making any other generation worse off. It is closely related to the notion of "golden rule of saving". In relation to markets, in [[industrial economics]], a common argument is that business concentrations or [[monopolies]] may be able to promote dynamic efficiency.<ref>Syrneonidis, D., [https://www.oecd.org/economy/growth/2496562.pdf Innovation. Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes], OECD Economic Studies No . 27. I996/11, accessed 20 January 2024</ref><br />
<br />
== Are modern economies dynamically efficient? ==<br />
Abel, Mankiw, Summers, and Zeckhauser (1989)<ref name=abel>{{cite journal|last1=Abel|first1=Andrew|last2=Mankiw|first2=Gregory|last3=Summers|first3=Lawrence|last4=Zeckhauser|first4=Richard|date=1989|title=Assessing Dynamic Efficiency: Theory and Evidence|url=https://repository.upenn.edu/cgi/viewcontent.cgi?article=1175&context=fnce_papers|journal=Review of Economic Studies|volume=56|issue=1|pages=1–20|doi=10.2307/2297746|jstor=2297746}}<!--|accessdate=24 July 2014--></ref> develop a criterion for addressing dynamic efficiency and apply this model to the United States and other [[OECD]] countries, suggesting that these countries are indeed dynamically efficient. <br />
<br />
== In the Solow growth model ==<br />
An economy in the [[Solow growth model]] is dynamically inefficient if the savings rate exceeds the [[Golden Rule savings rate]]. If the savings rate is greater than the Golden Rule savings rate, a decrease in savings rate will increase consumption per effective unit of labor. A savings rate higher than the Golden Rule savings rate implies that an economy could be better off today and tomorrow by saving less.<ref>{{cite web|last1=Sims|first1=Eric|title=Intermediate Macroeconomics: Economic Growth and the Solow Model|url=http://www3.nd.edu/~esims1/solow_model.pdf|accessdate=24 July 2014}}</ref><br />
<br />
==In other models==<br />
The [[Ramsey-Cass-Koopmans model]] does not have dynamic efficiency problems because agents discount the future at some rate β which is less than 1, and their savings rate is endogenous.<br />
<br />
The [[Overlapping generations model#Diamond OLG Model|Diamond growth model]] is not necessarily dynamically efficient because of the overlapping generation setup. In a competitive equilibrium, the growth rate may exceed the interest rate, which entails dynamic inefficiency. This is because agents are finitely lived.<ref>{{cite book|last1=Romer|first1=David|title=Advanced Macroeconomics|date=2012|edition=4}}</ref> However, competitive allocations are dynamically efficient if one augments the Diamond model with [[Theory of fructification|land]] as an additional factor of production.<ref>[[Stefan Homburg]] (1991), Interest and Growth in an Economy with Land. [https://ideas.repec.org/a/cje/issued/v24y1991i2p450-59.html ''Canadian Journal of Economics 24''], pp. 450-459.</ref><br />
<br />
==References==<br />
{{Reflist}}<br />
<br />
[[Category:Welfare economics]]</div>imported>BobKilcoyne