Optimal Growth in Continuous Time

The formulation of the optimal growth problem in continuous time is very similar. In particular, we have k (t) ≥ 0 and given k (0) = ko > 0. The objective function (5.22) is the direct continuous-time analog of (5.19), and (5.23) gives the resource constraint of the economy, similar to (5.20) in discrete time.

Once again, this problem lacks one boundary condition which will come from the transver- sality condition.

The most convenient way of characterizing the solution to this problem is via optimal control theory. Dynamic programming and optimal control theory will be discussed briefly in the next two chapters.

5.11.