An Alternative Approach to Optimal Growth Path by Adaptive Decision-Making based on Budgetary Control Management

In economics, we generally assume rational decision-making. However, practical decision-making is performed based on budgetary control management from businesses to households and governments. This principle corresponds to adaptive decision-making through sequentially updating decisions by managing variances between plans and actual results. In this paper, we examine the consumers' over time decision-making problem within the framework of the neoclassical growth model by incorporating replicator dynamics instead of the Keynes-Ramsey rule. Consequently, we show analytically that numerous and stable paths exist following the optimal growth path that leads to the modified golden rule level. Furthermore, simulation results show that we can achieve levels above 0.9 of the optimal growth path based on the social welfare level over time. The optimal growth model remains valuable because it provides a social welfare norm. But we can practically realize sufficient economic benefits without assuming the existence of an omniscient government or perfectly rational economic agents.