The hypothesis that capital increases at each time in response to an increase in the discount factor is explored for a class of aggregate models of optimal accumulation. When the optimal program is monotonic, capital is shown to increase with an increase in the discount factor. A counterexample in the case of oscillating programs is discussed. An application of the monotone case is given for an adjustment cost model of the firm.

The equivalence between optimal growth solutions and solutions of decentralized models of intertemporal allocation is explored in a one-consumer, heterogeneous capital goods framework. The decentralized economy follows a perfect foresight path. The main result is that the decentralized economy will impose on itself a transversality condition. This yields the interpretation of equilibrium prices as prices consistent with a certainty version of the efficient markets hypothesis. The results rest on the recent contribution by Benveniste and Scheinkman providing sufficient conditions for infinite horizon concave programs to exhibit capital value transversality as a necessary condition for optimality.

Journal Article On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households Get access Robert A. Becker Robert A. Becker Indiana University, Bloomington Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 95, Issue 2, September 1980, Pages 375–382, https://doi.org/10.2307/1885506 Published: 01 September 1980