Growth Theory under Deaton's Consumption Heuristic

Resumo/Abstract: Over the last decades, conceptual frameworks formulated to address the dynamics of economic growth have hypothesized, discussed and tested a large number of different assumptions concerning the role of capital accumulation, labor productivity, learning-by-doing, formal education, innovation, and diffusion of ideas. Underlying all these theoretical contributions is, on the demand side, a pervasive and apparently unshakable structure of analysis: economic agents invariably set an optimal intertemporal consumption plan which allows to maximize utility over an infinite horizon. Such behavior, however, suggests a planning ability that agents often lack. In fact, household decisions are frequently designed on the basis of heuristics or rules-of-thumb that, although not optimal, are reachable under the cognitive constraints typically faced by human beings. This paper revisits some of the most prominent models of the mainstream growth theory, taking a specific heuristic to account for consumption-savings decisions. The heuristic, proposed by Angus Deaton in the context of this author's research on consumption choices, is a static rule, what might suggest a return to a Solow-like growth analysis. Notwithstanding, Deaton's heuristic encloses a series of novel and relevant implications for growth theory; such implications are duly highlighted and discussed in this study.

Keywords: Growth theory; Consumption-savings heuristic; Non-optimal growth; Intertemporal choice; Neoclassical growth; Endogenous growth.

Outros seminários / Other seminars: Programa completo / Full programme.

17/05/2019 17h00 Sala 115
Growth Theory under Deaton's Consumption Heuristic - Orlando Gomes (ISCAL-IPL)
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