Samuelson Turnpike and Optimal Growth Theory, 1940s–1960s

Abstract

This chapter provides an alternative interpretation of the emergence of the “Ramsey-Cass-Koopmans” growth model, a framework which, alongside the overlapping generation model, is the dominant approach in today’s macroeconomics. By focusing on the role Paul Samuelson played through the works he developed in the turnpike literature, the author’s goal is to provide a more accurate history of growth theory of the 1940–1960s, one which started before Solow (1956) but never had him as a central reference. Inspired by John von Neumann’s famous 1945 article, Samuelson wrote his first turnpike paper by trying to conjecture an alternative optimal growth path (Samuelson, 1949 [1966]). In the 1960s, after reformulating the intertemporal utility model presented in Ramsey (1928), Samuelson began to propound it as a representative agent model. Through Samuelson’s interactions with colleagues and PhD students at the Massachusetts Institute of Technology (MIT), and given his standing in the profession, he encouraged a broader use of that device in macroeconomics, particularly, in growth theory. With the publication of Samuelson (1965), Tjalling Koopmans and Lionel McKenzie rewrote their own articles in order to account for the new approach. This work complements a recently written account on growth theory by Assaf and Duarte (2018).

Citation

Chu, H. (2021), "Samuelson Turnpike and Optimal Growth Theory, 1940s–1960s", Fiorito, L., Scheall, S. and Suprinyak, C.E. (Ed.) Research in the History of Economic Thought and Methodology: Including a Selection of Papers Presented at the 2019 ALAHPE Conference (Research in the History of Economic Thought and Methodology, Vol. 39A), Emerald Publishing Limited, Leeds, pp. 87-106. https://doi.org/10.1108/S0743-41542021000039A006