Linear programming and development planning models

Historically optimal allocation has been the major concern in the economic analysis. Such problems were dealt with classical optimization techniques such as differential calculus or the calculus of variations. A new class of optimization models has since become of considerable interest, related to problems of optimum allocation of limited resources in a given state of the economy. These new models are different in that they employ new solution techniques to arrive in their solutions. The most flourishing of these methods are linear programming, input-output analysis and game theory. The first to be developed was the game theory by John Von Neumann.1 The theory of games attempts to study economic behaviour by concentrating on individuals or groups with conflicting interests. Neumann showed that under certain assumptions each participant can act so as to be guaranteed at least a certain minimum gain or maximum loss. When each participant acts so as to secure his minimum guaranteed return, then he prevents his opponents from attaining any more than their minimum guaranteeable gains. Thus the minimum gains become the actual gains, and the actions and returns for all the participants are determinate.