ABSTRACT
This chapter describes a recursive programming model of the profit-maximising firm. It analyzes the whole economic system: prices and income distribution are determined within a general-equilibrium setting and profits appear as the remuneration of a very special factor of production, "entre-preneurship", which becomes "scarce" only in times of change. The chapter considers the problem of general economic equilibrium that is the simultaneous determination, in a dynamic context, of prices and quantities exchanged. This is a dynamic model of production and Investment in which the decisions of each period are conditioned by all past decisions and condition all future decisions. The chapter proposes the model of economic growth proposed closely resembles Schumpeter's "vision" of the development process. The model can be used to forecast output, prices and technical change for a whole economic system or for a section of it. With minor modifications, the model can also be converted into a decision model for economic planning.
