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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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    1. Günther Rehme, 2017. "“Love of wealth” and economic growth," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1305-1326, November.
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    1. Günther Rehme, 2017. "“Love of wealth” and economic growth," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1305-1326, November.
    2. Rehme, Günther, 2018. "On "rusting" money: Silvio Gesell's Schwundgeld reconsidered," Darmstadt Discussion Papers in Economics 233, Darmstadt University of Technology, Department of Law and Economics.
    3. Zaifu Yang & Rong Zhang, 2021. "Generalized Cumulative Offer Processes," Discussion Papers 21/08, Department of Economics, University of York.
    4. Zaifu Yang & Rong Zhang, 2024. "Consumption, Wealth, Frugality, and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 25(1), pages 31-61, May.
    5. 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.

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    More about this item

    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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