Neoclassical synthesis is a school of thought in economics resulting from the fusion of Keynesian and Neoclassical theories. Popular between the 1950s to the early 1970s, the school of thought uses Keynesian theories of macroeconomics (IS-LM, emphasis of demand side factors) and neoclassical microfoundations (laws of demand, theoretical equilibrium).
A fundamental consequence of this synthesis is the distinction between Keynesian and classical unemployment. The former is marked by an excess of supply in both goods and labor markets while the latter sees only an excess of supply in the labor market. This dual rationing then justifies fiscal and monetary policy in an effort to "jump start" the lingering demand for goods and pull the economy out of unemployment. Another way to think about Keynesian macroeconomic policy is a reversion of Say's Law; demand creates its own supply, instead of the other way around.
Maybe the General Theory, is just a special case of a standard classical problem. (Snowdon 2005, p. 123)
Paul Samuelson gets some credit for helping to create this approach to macro. [1]
| Macroeconomic schools of thought |
| Austrian Economics • Classical Economists • Keynesian economics• Marxism • Mercantilism • Monetarism • New Classicals • New Keynesians • Neoclassical • Neoclassical Synthesis • Neo-Keynesian • Physiocracy • Post-Keynesian economics • Supply-side economics |
Sources[]
- Snowdon, Vane, Wynarczyk. "A Modern Guide to Macroeconomics: An Introduction to Competing Schools of Thought." 1994
- Comprehensive summary
- Paul Samuelson: Economics, 1955
- ↑ Snowdon -- in Economics 1955