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Golden Age versus Golden Rule: Capitalists versus Workers in Growth Theory

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  • Frank Thompson

    (Department of Economics, University of Michigan)

Abstract

Golden Age steady states determined by saving rates maximizing profit are contrasted with the Golden Rule, that is, consumption maximizing, steady states highlighted in standard economic growth theory. Golden Rule steady states exemplify the classical socialist principle of distribution: to each according to work. Under the Golden Rule, consumption equals labor income, and given stationary class capital ownership shares, all profit must be invested and none consumed. In contrast, in Golden Age steady states, some profit can be freed for consumption, although the levels of investment, output, and most notably consumption are then all lower. These relationships are explored in models initially without, and then with, labor force growth and technical change.

Suggested Citation

  • Frank Thompson, 2003. "Golden Age versus Golden Rule: Capitalists versus Workers in Growth Theory," Review of Radical Political Economics, Union for Radical Political Economics, vol. 35(1), pages 3-17, March.
    • Handle: RePEc:sae:reorpe:v:35:y:2003:i:1:p:3-17
    DOI: 10.1177/0486613402250173
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    References listed on IDEAS

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    1. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    2. Loayza, Norman & Schmidt-Hebbel, Klaus & Serven, Luis, 2000. "What drives private saving around the world?," Policy Research Working Paper Series 2309, The World Bank.
    3. Frank Thompson, 1996. "Socializing the Surplus: A System of Life Estates," Review of Radical Political Economics, Union for Radical Political Economics, vol. 28(3), pages 83-91, September.
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    Cited by:

    1. A. J. Julius, 2005. "Overtakable capitalist growth paths," Macroeconomics 0501030, University Library of Munich, Germany.

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    Keywords

    economic growth; distribution;

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