Abstract
The competitive economy, over a long time scale, would produce a large number of general equilibria, each of which can be regarded as a possible microstate of this economy. Then by the principle of maximum entropy, we can obtain the most probable macrostate which in the case of perfect competition involving a single industry will lead to a Solow-type aggregate production function. By this aggregate production function, one can make clear how labors match firms on the balanced growth path. Here, we prove that when the capital stock of a society arrives at the golden-rule level on the balanced growth path, the social employment will reach the best level at which every firm on average employs an optimal amount of workers.
Highlights
Golden-rule level of capital stock is an important notion in the theory of economic growth[1]
The main purpose of this paper is to show that, for a perfectly competitive economy, when the capital stock of this economy arrives at the golden-rule level on the balanced growth path, the social employment will reach the best level at which everyrm on average employs an optimal amount of workers
In the spirit of neoclassical microeconomics, a general equilibrium ensures an optimal behavior of consumer andrm, so that each consumer's utility and eachrm's prot are maximal, respectively
Summary
Golden-rule level of capital stock is an important notion in the theory of economic growth[1]. Tao[17] showed that if a spontaneous economic order emerges, the aggregate output can be written as a function ofrms' number and technological progress, and the empirical tests of Tao's theory were fully studied by Tao et al.[18] On the other hand, the neoclassical growth model requires that the aggregate output is generally a function of labor, capital and technological progress. The main purpose of this paper is to show that, for a perfectly competitive economy, when the capital stock of this economy arrives at the golden-rule level on the balanced growth path, the social employment will reach the best level at which everyrm on average employs an optimal amount of workers
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