Control theory heuristics for improving the behavior of economic models

摘要

AbstractThe usefulness of control theory techniques in economic simulations is examined. A model of the capital investment accelerator is used for illustration. It is shown that behavior approaching optimality can be achieved in a highly nonlinear system with simple heuristics based on linearization and constant state feedback with an appropriate choice of desired closed‐loop poles. Applications to real‐life situations are discussed, and suggestions are made for approaching potential problems using similar control theory techniq