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