Optimal growth, technical progress and economic conservation law

Technical progress is an extremely important determinant in the growth of an economy. Under the framework of the neoclassical growth model, most of the previous studies suggested that technical change is Harrod neutral. It has been alleged that there exists only pure labor-augmenting technical progress, (or Harrod neutral), for an advanced industrialized economy, since capital output ratio and rate of interest are almost constant. It is observed, however, that the interest rate has varied and the capital efficiency has been improved. In Part I of this dissertation, we construct an optimal growth model with endogenous technical progress and non-linear transformation functions. The model shows that the technical progress is biased, or factor-augmenting. Further, the stability of the system is rigorously examined.;The concept of economic conservation law was first explicitly introduced by Samuelson (1970). However, the derivation of economic conservation laws via the application of Noether's theorem and Lie groups were first rigorously and systematically discussed in Sato (1981). In Part II, we give a brief summary of the methodology underlying the Noether's theorem. Two economic conservation laws are derived as the application of Noether's theorem. One is a microeconomic conservation law corresponding to the microeconomic control problem proposed by Sato and Ramachandran (1987), and the other is a macroeconomic conservation law corresponding to the optimal growth model constructed in this dissertation. The microeconomic conservation law states that for a profit maximization monopolistic firm, the ratio of current profit plus the change of market value to the current market value is constant. The macroeconomic conservation law shows that modified national income is proportional to national wealth.;By using U.S. data, we test both microeconomic and macroeconomic conservation laws derived in this dissertation and estimate capital efficiency factor and labor efficiency factor respectively.