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Incorporating Fuzzy Logic in Harrod’s Economic Growth Model

Author

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  • Joan Carles Ferrer-Comalat

    (Department of Business Administration, University of Girona, C/Universitat de Girona 10, 17071 Girona, Spain)

  • Salvador Linares-Mustarós

    (Department of Business Administration, University of Girona, C/Universitat de Girona 10, 17071 Girona, Spain)

  • Ricard Rigall-Torrent

    (Department of Economics, University of Girona, C/Universitat de Girona 10, 17071 Girona, Spain)

Abstract

This paper suggests the possibility of incorporating the methodology of fuzzy logic theory into Harrod’s economic growth model, a classic model of economic dynamics for studying the growth of a developing economy based on the assumption that an economy with only savings and investment income is in equilibrium when savings are equal to investment. This model was the first precursor to exogenous growth models, which in turn gave rise to endogenous growth models. This article therefore represents a first step towards introducing fuzzy logic into economic growth models. The study concerned considers consumption and savings to depend on income by means of uncertain factors, and investment to depend on the variation of income through the accelerator factor, which we consider uncertain. These conditions are used to determine the equilibrium growth rate of income and investment, as well as the uncertain values for these variables in terms of fuzzy numbers. As a result, the new model is shown to expand the classical model by incorporating uncertainty into its variables.

Suggested Citation

  • Joan Carles Ferrer-Comalat & Salvador Linares-Mustarós & Ricard Rigall-Torrent, 2021. "Incorporating Fuzzy Logic in Harrod’s Economic Growth Model," Mathematics, MDPI, vol. 9(18), pages 1-20, September.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:18:p:2194-:d:631222
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
    3. J.C. Ferrer Comalat & S. Linares Mustarós & D. Corominas Coll, 2016. "A Formalization Of The Theory Of Expertons. Theoretical Foundations, Properties And Development Of Software For Its Calculation," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), vol. 21(1), pages 23-39, May.
    4. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    5. Easterly, William, 1997. "The ghost of financing gap : how the Harrod-Domar growth model still haunts development economics," Policy Research Working Paper Series 1807, The World Bank.
    6. Yusuf M. Mansur, 1995. "Fuzzy Sets And Economics," Books, Edward Elgar Publishing, number 299.
    7. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
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