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“Love of wealth” and economic growth

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  • Günther Rehme

Abstract

This paper complements research on how {\em love of wealth} bears on key variables in a Ramsey-Cass-Koopmans growth framework. It is shown that for an optimum the social planner cannot have an excessive {\em love of wealth}. If the planner has the `right' {\em love of wealth} an optimum exists and implies higher long-run per capita capital, income and consumption relative to the standard optimal growth model. The optimum implies dynamic efficiency with the possibility to get arbitrarily close to the Golden Rule where long-run per capita consumption is maximal. It is shown that the optimal path is attaining its steady state more slowly. Thus, the beneficial effects of {\em love of wealth} materialize later than in the standard model. Furthermore, the economy can be decentralized as a competitive private ownership economy. One can then identify {\em love of wealth} with the ``spirit of capitalism''. The paper, hence, implies that one needs a 'right' level of the ``spirit of capitalism'' to realize any beneficial effects for the long run.
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  • Günther Rehme, 2017. "“Love of wealth” and economic growth," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1305-1326, November.
    • Handle: RePEc:bla:rdevec:v:21:y:2017:i:4:p:1305-1326
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    File URL: http://hdl.handle.net/10.1111/rode.12318
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    Cited by:

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    4. Shiro Kuwahara, 2018. "When is the Spirit of Capitalism Effective for Economic Development?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(3), pages 70-82, March.
    5. Rehme, Günther, 2018. "On ‘Rusting’ Money Silvio Gesell’s Schwundgeld Reconsidered," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 106303, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P40 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - General
    • A10 - General Economics and Teaching - - General Economics - - - General

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