The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Golden Rule

  • Edmund S. Phelps
Reference work entry


The so-called golden rule (of capital accumulation) is a proposition about the consequences for national welfare possibilities of alternative paths of national wealth, and hence of national saving, in a closed economy. It states that the steady-growth state that gives the maximum path of consumption is the one along which national consumption equals the national wage bill and thus national saving equals ‘profits’. The basic significance of the golden rule is as a warning against national policies of over-saving or counterproductive austerity.


Capital accumulation Capital-output ratio Golden rule Maximin National consumption function Natural rate of growth Phelps, E. S. Reciprocity Robinson, J. V. Saving-output ratio Schumpeter, J. A. Social optimum Social rate of return Solow, R. M. Steady-growth state Swan, T. W. Technological progress Utilitarianism 

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Edmund S. Phelps
    • 1
  1. 1.