IDEAS home Printed from https://ideas.repec.org/a/bla/ijethy/v6y2010i1p11-28.html
   My bibliography  Save this article

The Phelps–Koopmans theorem and potential optimality

Author

Listed:
  • Debraj Ray

Abstract

The Phelps–Koopmans theorem states that if every limit point of a path of capital stocks exceeds the “golden rule,” then that path is inefficient: there is another feasible path from the same initial stock that provides at least as much consumption at every date and strictly more consumption at some date. I show that in a model with nonconvex technologies and preferences, the theorem is false in a strong sense. Not only can there be efficient paths with capital stocks forever above and bounded away from a unique golden rule, such paths can also be optimal under the infinite discounted sum of a one‐period utility function. The paper makes clear, moreover, that this latter criterion is strictly more demanding than the efficiency of a path.

Suggested Citation

  • Debraj Ray, 2010. "The Phelps–Koopmans theorem and potential optimality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 11-28, March.
  • Handle: RePEc:bla:ijethy:v:6:y:2010:i:1:p:11-28
    DOI: 10.1111/j.1742-7363.2009.00119.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1742-7363.2009.00119.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1742-7363.2009.00119.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mitra, Tapan & Ray, Debraj, 2012. "On the Phelps–Koopmans theorem," Journal of Economic Theory, Elsevier, vol. 147(2), pages 833-849.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dai, Darong, 2011. "Wealth Martingale and Neighborhood Turnpike Property in Dynamically Complete Market with Heterogeneous Investors," MPRA Paper 46416, University Library of Munich, Germany.
    2. Darong Dai, 2013. "Wealth Martingale and Neighborhood Turnpike Property In Dynamically Complete Market With Heterogeneous Investors," Economic Research Guardian, Weissberg Publishing, vol. 3(2), pages 86-110, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cuong Le Van & Ngoc-Sang Pham, 2016. "Intertemporal equilibrium with financial asset and physical capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 155-199, June.
    2. Bosi, Stefano & Le Van, Cuong & Pham, Ngoc-Sang, 2017. "Asset bubbles and efficiency in a generalized two-sector model," Mathematical Social Sciences, Elsevier, vol. 88(C), pages 37-48.
    3. Stefano Bosi & Cuong Le Van & Ngoc-Sang Pham, 2014. "Intertemporal equilibrium with production: bubbles and efficiency," Post-Print halshs-01020888, HAL.
    4. Acemoglu, Daron, 2012. "Introduction to economic growth," Journal of Economic Theory, Elsevier, vol. 147(2), pages 545-550.
    5. Gregory Ponthiere, 2024. "Fertility, heterogeneity, and the Golden Rule," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.
    6. Darong Dai, 2014. "On the Turnpike Property of the Modified Golden Rule," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 8(1), pages 26-32, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ijethy:v:6:y:2010:i:1:p:11-28. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1742-7355 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.