Decentralized Evolutionary Mechanism of Growth in a Linear Multi‐sector Model

The paper considers the following mechanism of intertemporal decisions in a linear multisector production model: at each time t a program for two time periods t, t + 1 is worked out but is followed only during the first period t, after which the rest of the program is replaced by a new two‐period program for t + 1, t + 2, etc. Terminal conditions in these two‐period programs are continually adapted to the current state. The result of the procedure, called an adaptive rolling plan, is shown to yield growth of production at the maximum rate over time which is a natural intertemporal optimality criterion for the production model. It is also demonstrated that adaptive rolling plans can be realized in a decentralized economy, and therefore they provide an intertemporally decentralized mechanism of achieving maximum growth.