golden rule savings rate

The golden rule savings rate is then implied by the connection between s and k in steady state (see above).

In a typical Cobb-Douglas production function the golden rule savings rate is alpha.

The optimal savings rate is called the golden rule savings rate and is derived below.

As part of this research, Phelps published in 1961 a famous paper on the golden rule savings rate, one of his most important works for economic science.

Out of all possible choices for s, one will produce the highest possible steady state value for c and is called the golden rule savings rate.

This includes the idea of the Golden Rule savings rate, which is about how much money should be spent and how much should be saved for the future.

In economics, the Golden Rule savings rate is the rate of savings which maximizes steady state level or growth of consumption, as for example in the Solow growth model.

To discover the optimal capital/labour ratio, and thus the golden rule savings rate, first note that consumption can be seen as the residual output that remains after providing for the investment that maintains steady state:

Since the golden rule applies only in the steady state an economy not in that state "should not" aspire to the golden rule savings rate, even if the precepts of neo-classical economics growth theory are accepted.

However, certain restrictions on the underlying technology of production and consumer tastes can ensure that the steady state level of saving corresponds to the Golden Rule savings rate of the Solow growth model and thus guarantee intertemporal efficiency.

His demonstration of the Golden Rule savings rate, a concept first devised by John von Neumann and Maurice Allais, started a wave of research on how much a nation ought to spend on present consumption rather than save and invest for future generations.