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The neoclassical synthesis is a macroeconomic theory that emerged in the mid-20th century, combining the ideas of neoclassical economics with Keynesian economics. The synthesis was an attempt to reconcile the apparent differences between the two schools of thought and create a more comprehensive theory of macroeconomics.
Keynes's interpretation is rejected by many economists as a misinterpretation or caricature of Say's law — see Say's law: Keynes vs. Say — and the advocacy of the phrase "supply creates its own demand" is today most associated with supply-side economics, which retorts that "Keynes turned Say on his head and instead stated that 'demand ...
Post-Keynesian economists, on the other hand, reject the neoclassical synthesis and, in general, neoclassical economics applied to the macroeconomy. Post-Keynesian economics is a heterodox school that holds that both neo-Keynesian economics and New Keynesian economics are incorrect, and a misinterpretation of Keynes's ideas. The post-Keynesian ...
The attempt to combine neo-classical microeconomics and Keynesian macroeconomics would lead to the neoclassical synthesis [30] which was the dominant paradigm of economic reasoning in English-speaking countries from the 1950s till the 1970s. Hicks and Samuelson were for example instrumental in mainstreaming Keynesian economics.
The Keynesian Revolution was a fundamental reworking of economic theory concerning the factors determining employment levels in the overall economy. The revolution was set against the then orthodox economic framework, namely neoclassical economics.
Despite its prevalence, the neoclassical synthesis had its Keynesian critics. A strain of disequilibrium or "non-Walrasian" theory developed [70] that criticized the synthesis for apparent contradictions in allowing disequilibrium phenomena, especially involuntary unemployment, to be modeled in equilibrium models. [71]
New classical economics contributed the methodology behind real business cycle theory [6] and new Keynesian economics contributed nominal rigidities (slow moving and periodic, rather than continuous, price changes also called sticky prices). [7] The new synthesis provides the theoretical foundation for much of contemporary mainstream economics.
The General Theory of Employment, Interest and Money is a book by English economist John Maynard Keynes published in February 1936. It caused a profound shift in economic thought, [1] giving macroeconomics a central place in economic theory and contributing much of its terminology [2] – the "Keynesian Revolution". It had equally powerful ...