An application of optimal control theory in welfare economics
We consider the maximization of a functional representing social welfare over continuous time. A social welfare functional (SWF) is an integral that models social welfare as a function of individual consumption, individual utility of consumption and the value of utility aggregated across individuals. A SWF may be subject to constraints in the form of differential or integral equations and inequalities, which represent the production possibilities of the economy. We solve the optimization problem by applying the Pontryagin maximum principle. We consider an autarky and a command economy. We explore the interaction of impatience and productivity in autarky and the implications of different maxims of distributive justice in a command economy.
Networked Digital Library of Theses and Dissertations