A characteristic feature of the consumption-loan model
Abstract Samuelson provided an exact consumption-loan model of interest, and asserted, by way of an example, the impossibility theorem that the biological rate of interest with the optimality properties of the so-called golden rule can never be achieved dynamically through the consumption-loan market. Despite his contribution and those that followed, the important question remains as to whether the alleged instability of the biological rate of interest is of a more general nature. To date no definite conclusion is yet available. The purpose in this paper is to present a clear-cut view of the problem, and to clarify the key factors that validate or invalidate the impossibility theorem.