Dynamic efficiency

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Dynamic efficiency is a term in economics, which refers to an economy that appropriately balances short run concerns (static efficiency) with concerns in the long run (focusing on encouraging research and development).[1]

Dynamic efficiency in growth model[edit]

The Ramsey-Cass-Koopmans model does not have dynamic efficiency problems, but the Diamond Growth model is dynamically inefficient because of the overlapping generation setup; there is an allocation point which is better than the competitive equilibrium allocation point.[citation needed]

See also[edit]


  1. ^ Joseph E Stiglitz and Carl E Walsh, Economics (London, WW Norton, 4th Ed, 2006) Glossary A-3