Optimal Growth with Robust Feedback Control,
Abstract
The paper is divided into four parts. A brief discussion of the Pontraygin's Maximum Principle is contained in Part 1. A mathematical derivation of the Feedback Control law is the subject of Part 2. The optimal and suboptimal nature of the FC law is discussed in Part 3. It is shown how the destination of the growth path (which is called the origin) can be found through a series of mid-courses corrections, and that the FC law is robust in face of specification errors. The economy will converge to the optimal path. In Part 4 it is shown how a decentralized competitive economy, where the agents are myopic, may behave in a manner similar to a planned economy using feedback control. The instability characteristics of a planned economy using the PMP do not appear when growth occurs in such a model of a decentralized competitive economy, where the households make decisions simply on the basis of the marginal rates of substitution (slopes of indifference curves) and marginal rates of transformation (market opportunities). To summarize, the aim of this paper is to do what Burmeister and Dobell claim is the next step in optimal growth theory. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Oct 01, 1970
- Accession Number
- AD0715135
Entities
People
- Ettore Infante
- Jerome L. Stein
Organizations
- Brown University