Optimum Accumulation Under Uncertainty: the Case of Stationary Returns to Investment

James Mirrlees

Chapter 3 in Allocation under Uncertainty: Equilibrium and Optimality, 1974, pp 36-50 from Palgrave Macmillan

Abstract: Abstract In the theory of optimum growth it has been found that models with discrete time are easier to treat rigorously than models with continuous time. But continuous-time models often have the advantage of providing simpler results. I shall illustrate this tension in the present paper by discussing the model for optimum growth under uncertainty that has received most attention in the literature (Phelps [6], Levhari and Srinivasan [4], Hahn [2], Hakansson [3], Brock and Mirman [1]). An existence theorem will be proved for the discrete-time case. By a heuristic argument, I obtain an equation for the optimum under continuous-time which makes possible results about the effects of uncertainty on the optimum policy more general than are available in discrete time. These latter results are somewhat surprising. By way of prelude I outline the reasons for research into optimum growth under uncertainty, and offer a classification of models. The model discussed in this paper is less appealing than some others; but it seems to be the easiest one.

Keywords: Optimum Policy; Optimal Path; Deterministic Model; Individual Decision; Optimum Consumption (search for similar items in EconPapers)
Date: 1974
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DOI: 10.1007/978-1-349-01989-2_3

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