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Dynamic EconomicsOptimization by the Lagrange Method$
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Gregory C. Chow

Print publication date: 1997

Print ISBN-13: 9780195101928

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195101928.001.0001

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Introduction

Introduction

Chapter:
(p.2) (p.3) Chapter One Introduction
Source:
Dynamic Economics
Author(s):

GREGORY C. CHOW

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195101928.003.0001

Dynamic economics involves explaining economic behavior that occurs through time. Although all of the economic behavior expressed by both enterprises and individuals occurs through time, there is a need to distinguish dynamic economics from other forms of economics because of how scientific theorizing entails abstraction. The term “dynamic economics” is used specifically in cases that concern long periods of development because for such cases, the time paths of various economic variables and the dynamic aspects of economic behavior are usually not taken into account. Initially, models of dynamic economics were mainly based on ad hoc assumptions and difference equations were prevalent as a tool for analysis. The development of dynamic econometric models between the 1950s and the 1970s introduced the lagged effects of variables. While optimization appears to be the fundamental goal of economics, dynamic economics involves choosing the appropriate uses for scarce resources across different periods of time.

Keywords:   dynamic economics, economic behavior, time, economic variables, lagged effects

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