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Steady state (macroeconomics)
 
 
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The steady state is a condition of the economy in which output per worker (productivity
Productivity

Productivity in economics refers to metrics and measures of output from production processes, per unit of input. Labor productivity, for example, is typically measured as a ratio of output per labor-hour, an input....
 of labour) and capital
Capital (economics)

In economics, capital or capital goods or real capital refers to factors of production used to create goods or services that are not themselves significantly consumed in the production process....
 per worker (capital intensity
Capital intensity

Capital intensity is the term in economics for the amount of fixed or real Capital present in relation to other factors of production, especially labor....
) do not change over time. This is due to the rate of new capital production from invested savings exactly equaling the rate of existing capital depreciation
Depreciation

Depreciation is a term used in accounting, economics and finance to spread the cost of an asset over the span of several years.In simple words we can say that depreciation is the reduction in the value of an asset due to usage, passage of time, wear and tear, technological outdating or obsolescence, depletion, inadequacy, rot, rust, decay o...
. Exogenous growth models
Exogenous growth model

The Exogenous growth model, also known as the Neo-classical growth model or Solow-Swan growth model is a term used to sum up the contributions of various authors to a economic model of long-run economic growth within the framework of neoclassical economics....
 show how economies will naturally tend to a steady-state. The steady-state is generally associated with the Nobel Prize-winning economist Robert Solow
Robert Solow

Robert Merton Solow is an United States economist particularly known for his work on the theory of economic growth. He was awarded the John Bates Clark Medal and the 1987 Nobel Memorial Prize in Economic Sciences....
, who created the Solow Model
Exogenous growth model

The Exogenous growth model, also known as the Neo-classical growth model or Solow-Swan growth model is a term used to sum up the contributions of various authors to a economic model of long-run economic growth within the framework of neoclassical economics....
 in 1956.

hyphenated phrase "steady-state economy" is used in neoclassical economics
Neoclassical economics

Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distribution s in markets through supply and demand, often as mediated through a hypothesized maximization of income-constrained utility by individuals and of cost-constrained profits of firms employing avai...
 to refer to an economy with steady ratios of capital:labor.






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The steady state is a condition of the economy in which output per worker (productivity
Productivity

Productivity in economics refers to metrics and measures of output from production processes, per unit of input. Labor productivity, for example, is typically measured as a ratio of output per labor-hour, an input....
 of labour) and capital
Capital (economics)

In economics, capital or capital goods or real capital refers to factors of production used to create goods or services that are not themselves significantly consumed in the production process....
 per worker (capital intensity
Capital intensity

Capital intensity is the term in economics for the amount of fixed or real Capital present in relation to other factors of production, especially labor....
) do not change over time. This is due to the rate of new capital production from invested savings exactly equaling the rate of existing capital depreciation
Depreciation

Depreciation is a term used in accounting, economics and finance to spread the cost of an asset over the span of several years.In simple words we can say that depreciation is the reduction in the value of an asset due to usage, passage of time, wear and tear, technological outdating or obsolescence, depletion, inadequacy, rot, rust, decay o...
. Exogenous growth models
Exogenous growth model

The Exogenous growth model, also known as the Neo-classical growth model or Solow-Swan growth model is a term used to sum up the contributions of various authors to a economic model of long-run economic growth within the framework of neoclassical economics....
 show how economies will naturally tend to a steady-state. The steady-state is generally associated with the Nobel Prize-winning economist Robert Solow
Robert Solow

Robert Merton Solow is an United States economist particularly known for his work on the theory of economic growth. He was awarded the John Bates Clark Medal and the 1987 Nobel Memorial Prize in Economic Sciences....
, who created the Solow Model
Exogenous growth model

The Exogenous growth model, also known as the Neo-classical growth model or Solow-Swan growth model is a term used to sum up the contributions of various authors to a economic model of long-run economic growth within the framework of neoclassical economics....
 in 1956.

Economy state

The hyphenated phrase "steady-state economy" is used in neoclassical economics
Neoclassical economics

Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distribution s in markets through supply and demand, often as mediated through a hypothesized maximization of income-constrained utility by individuals and of cost-constrained profits of firms employing avai...
 to refer to an economy with steady ratios of capital:labor. Here, a steady-state economy may be a stable steady-state, a growing steady-state, or receding steady-state, each of which may constitutes the steady state (no hyphen) economy. A steady state may be stable in a dynamical system with deterministic generator function Nt+1=F(Nt) if, loosely, all nearby trajectories go to it.

In an economy without technological progress, output and capital per worker are no longer changing. In an economy with technological progress, output and capital per effective worker are constantly changing.

One way to break out of a steady-state would be the (instant) adoption of new technology that improves marginal productivity, another would be the (instant) adoption of a lower-depreciation technology. These improvements would be represented as changes to the given
Exogenous

Exogenous refers to an action or object coming from outside a system. It is the opposite of endogenous, something generated from within the system....
 variables in typical growth models. These macroeconomic models would predict the drift to a new steady state (tending
Limit (mathematics)

In mathematics, the concept of a "limit" is used to describe the behavior of a Function as its argument or input either "gets close" to some point, or as the argument becomes arbitrarily large; or the behavior of a sequence's elements as their index increases indefinitely....
 to a static
Static

Static has several meanings:* Static electricity, a net charge of an object** The triboelectric effect, e.g. from shoes rubbing carpet* White noise, a random signal with a flat power spectral density...
 output per worker different from the original level).

See also

  • Carrying capacity
    Carrying capacity

    The supportable population of an organism, given the food, habitat, drinking water and other necessities available within an environment is known as the environment's carrying capacity for that organism....
  • Ecological footprint
    Ecological footprint

    The ecological footprint is a measure of human demand on the Earth's ecosystems. It compares human demand with planet Earth's Ecology capacity to regenerate....
  • Economic growth
    Economic growth

    Economic growth is the increase in the amount of the goods and services produced by an economics over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP....
  • Equilibrium
    Equilibrium

    For the opposite, see disequilibrium.Equilibrium is the condition of a system in which competing influences are balanced and it may refer to:...
  • Evolutionary economics
    Evolutionary economics

    Evolutionary economics is a heterodox economics school of economics thought that is inspired by evolutionary biology. Much like mainstream economics, it stresses complex interdependencies, competition, growth, structural change, and resource constraints but differs in the approaches which are used to analyze these phenomena....
  • Growth curve
    Growth curve

    A growth curve in biology generally concerns a measured property such as population size, body height or biomass. Values for the measured property can be plotted on a graph of a function as a function of time; see Figure 1 for an example....
  • Herman Daly
    Herman Daly

    Herman Daly is an American ecological economist and professor at the University of Maryland School of Public Policy of University of Maryland, College Park in the United States....
  • Limits to Growth
    Limits to Growth

    The Limits to Growth is a 1972 book modeling the consequences of a rapidly growing world population and finite resource supplies, commissioned by the Club of Rome....
  • Population dynamics
    Population dynamics

    Population dynamics is the branch of life sciences that studies short- and long-term changes in the size and age composition of populations, and the biology and environment processes influencing those changes....
  • Steady State theory
    Steady State theory

    In physical cosmology, the Steady State theory is a model developed in 1948 by Fred Hoyle, Thomas Gold, Hermann Bondi and others as an non-standard cosmology to the Big Bang theory ....


External links

  • entry at Encyclopedia of the Earth