Abstract:
Economists were interested in economic stabilization policies as early as the 1930’s but the formal applications of stability theory from the classical control theory to economic analysis appeared in the early 1950’s when a number of control engineers actively collaborated with economists on economic stability and feedback mechanisms. The theory of optimal control resulting from the contributions of mathematicians Lev Semenovich Pontryagin and Richard Ernest Bellman in the late 1950’s was first applied successfully to models of economic growth in the 1960’s by the economists who were interested in discovering the optimality properties of economic growth trajectories. It is shown that the collaborations of control engineers with econometricians in the 1970’s on the computation of optimal state and control trajectories in econometric models were the earliest attempts to demonstrate the possibility of applying deterministic, stochastic and adaptive optimal control to the numerical solution of optimal economic policies. We have explained why the collaborations of control engineers with econometricians on formulating and computing optimum system design in macroeconomic optimal planning models failed and why the economic applications of optimal control theory have proved to be more productive in the analysis of optimality conditions in mathematical economics and not in the computation of optimal trajectories in econometric models.
Machine summary:
"Moreover, this paper attempts to examine the question that to what extent the unwillingness of control engineers, mathematical economists and econometricians to identify the structural differences between economic and physical systems was responsible for the failure of the application of optimal control theory to optimum system design and estimation in economic modeling.
e. , in 1978, and after the publication of about 1400 research work on the applications of systems and control theory to economic 8 Masoud Derakhshan analysis1, the Committee on Policy Optimization chaired by Professor Robert James Ball of the London Business School, published their report in March 1978, the purpose of which was "...
Westcott and Kent Dell Wall (1976) in stochastic policy optimization of economic systems, published in Automatica, one of the leading engineering journals in optimal control theory, significantly influenced the subsequent direction of research work in this area, particularly due to the fact that Westcott was Professor of Control Systems at Imperial College of Science and Technology, University of London.
ii) Economic applications of engineering optimal control theory with the aim of numerical computations of optimal trajectory for policy variables in order to drive the economy along a desired path while satisfying an objective function.
Many control engineers collaborated closely with econometricians on the application of deterministic, stochastic and adaptive optimal control techniques to numerically compute the optimal state and control trajectories in medium to large scale linear or nonlinear economic models with quadratic and non-quadratic performance functions."