The Neoclassical Theorem and Distribution of Income and Wealth

Abstract

The neoclassical theorem, provided by Mrs Robinson and others, states that per capita consumption is maximized in the state of balanced growth (or the Golden Age ) if the rate of profit is equal to the rate of growth. In such a state, the average saving ratio should be equal to the relative profit share. Except for this condition, “it does not matter at all who does the saving so long as the rate of profit is equal to the rate of growth,” in Mrs Robinson’s words ([1], p. 226). Commenting on this theorem, Samuelson states that “it has nothing essential to do with saving propensities” in the sense that “it is really a theorem about technology and production” ([1], p. 251). An identical comment is also given by Solow ([1], p. 257). These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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