Frank Ramsey’s Optimal Savings

S. Niggol Seo

Chapter Chapter 8 in The Economics of Optimal Growth Pathways, 2023, pp 181-189 from Springer

Abstract: Abstract This chapter provides a brief review of the theory of optimal savings by Frank Ramsey. He asked how much a nation should save or consume the goods and services produced by the nation if it were to manage its economy in a socially optimal manner over time. Introducing a social utility function, he concluded that the rate of saving multiplied by the marginal utility of money should always be equal to the difference between the total social utility and the maximum possible utility. The model relied on the assumption of a constant population as well as a constant technology. He also vehemently argued for a zero social discounting of future consumptions.

Keywords: Optimal saving rate; Social utility function; Constant population; Zero discounting (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-20754-9_8

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