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.
Olivier de la Grandville
Cambridge University Press
Country of Publication:
2nd Revised edition
01 December 2016
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.
Olivier de La Grandville is Senior Professor at Frankfurt University and Visiting Professor in the Management Science and Engineering Department at Stanford University. He was Professor of Economics at the University of Geneva from 1978 to 2007 and he is the author of seven books on topics ranging from microeconomics to macroeconomics and finance.