In the second edition of this user-friendly book, Olivier de La Grandville provides a clear and original introduction to the theory of economic growth, its mechanisms and its challenges. The book has been fully updated to incorporate several important new results and proofs since the first edition. In addition to a progressive treatment of dynamic optimization, readers will find intuitive derivations of all central equations of the calculus of variations and of optimal control theory. It offers a new solution to the fundamental question: How much should a nation save and invest? La Grandville shows that the optimal savings rule he suggests not only corresponds to the maximization of future welfare flows for society, but also maximizes the value of society's activity, as well as the total remuneration of labour. The rule offers a fresh alternative to dire current predictions about an ever-increasing capital-output ratio and a decrease of the labour share in national income.
Foreword Robert M. Solow
Preface
Introduction
Part I. Positive Growth Theory:
1. The welfare of society and economic growth
2. The growth process: an intuitive approach
3. A production function of central importance
4. Poverty traps
5. The CES production function as a general mean in collaboration with Robert M. Solow
6. Why has the elasticity of substitution most often been observed as smaller than 1? And why is it of importance?
7. Capital-labour substitution and economic growth in collaboration with Robert M. Solow
8. The long-term growth rate as a random variable, with an application to the US economy
Part II. Optimal Growth Theory:
9. Optimal growth theory: an introduction to the calculus of variations
10. Deriving the central equations of the calculus of variations at a single stroke of the pen
11. Other major tools for optimal growth theory: the Pontryagin maximum principle and the Dorfmanian
12. First applications to optimal growth
13. Optimal growth and the optimal savings rate
Part III. A Unified Approach:
14. Preliminaries: interest rates and capital valuation
15. From arbitrage to equilibrium
16. Why is traditional optimal growth theory mute? Restoring its rightful voice
17. Problems in growth: common traits between planned economies and poor countries
18. From Ibn Khaldun to Adam Smith, and a proof of Smith's conjecture
19. Capital and economic growth in the coming centuries
In conclusion: on the convergence of ideas and values through civilizations
Further reading, data on growth and references
Index.
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