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Optimal Control Theory for Undergraduates

Author

Listed:
  • Ernst Juerg Weber

    (Department of Economics, The University of Western Australia)

Abstract

Dynamic optimization is widely used in financial economics, macroeconomics and resource economics. This is accounting for some tension between the undergraduate and graduate teaching of economics because most undergraduate programs still concentrate on static economic analysis. This paper shows how, with the help of the Microsoft Excel Solver tool, the principles of dynamic economics can be taught to students with minimal knowledge of calculus. As it is assumed that the reader has no prior knowledge of optimal control theory, some attention is paid to the main concepts of dynamic optimization.

Suggested Citation

  • Ernst Juerg Weber, 2005. "Optimal Control Theory for Undergraduates," Economics Discussion / Working Papers 05-07, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:05-07
    as

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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2005/05_07_Weber.pdf
    File Function: First version, 2005
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    References listed on IDEAS

    as
    1. Eric Nævdal, 2003. "Solving Continuous-Time Optimal-Control Problems with a Spreadsheet," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(2), pages 99-122, January.
    2. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
    4. Stuart Dreyfus, 2002. "Richard Bellman on the Birth of Dynamic Programming," Operations Research, INFORMS, vol. 50(1), pages 48-51, February.
    5. Dorfman, Robert, 1969. "An Economic Interpretation of Optimal Control Theory," American Economic Review, American Economic Association, vol. 59(5), pages 817-831, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Optimal Control Theory; Economic Education; Microsoft Excel;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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