Weber_Optimal Control Theory for Undergraduates Using the Microsoft Excel Solver Tool

Optimal Control Theory for Undergraduates Using the Microsoft Excel Solver Tool Ernst Juerg Weber University of Western Australia A Ab bs st tr ra ac ct t Dynamic optimisation is widely used in financial economics, macroeconomics and resource economics.... More

Optimal Control Theory for Undergraduates Using the Microsoft Excel Solver Tool Ernst Juerg Weber University of Western Australia A Ab bs st tr ra ac ct t Dynamic optimisation is widely used in financial economics, macroeconomics and resource economics. This accounts for friction between the undergraduate and graduate teaching of economics because most undergraduate programmes still concentrate on static economic analysis. This paper shows how, with the help of the Microsoft Excel Solver tool, the principles of dynamic economics can be taught to students with minimal knowledge of calculus. As it is assumed that the reader has no prior knowledge of optimal control theory, some attention is paid to the main concepts of dynamic optimisation. I In nt tr ro od du uc ct ti io on n Dynamic economic analysis emerged more than half a century ago. Ramsey (1928) analysed the consumptionsaving decision, and Hotelling (1931) showed how an exhaustible resource is optimally managed. Allen (1938) Less