General Conclusions. Economic Theory in the Twentieth Century. A Comprehensive Overview

Building on the analysis developed across the four volumes of this book, this chapter offers a comprehensive overview of the evolution of economic theory throughout the twentieth century. It begins with the effort to establish a new scientific foundation for economic theory through the neoclassical paradigm, developed in response to the crisis of classical political economy, between the 1890s and World War I. This is followed by the analysis of the attempts of building theoretical approaches more appropriate to face the problems and challenges of an era of crisis and uncertainty between the two world wars. The narrative then turns to the rise and consolidation of the American mainstream of the “Neoclassical Synthesis” during the postwar era, a paradigm that entered into crisis in the early 1970s. The chapter then traces the attempted re-foundation of neoclassical theory in the decades that followed, through the research program of New Classical Macroeconomics culminated in the “New Neoclassical Synthesis”. At the same time, the chapter highlights the emergence of a range of novel research programs—notably the New Keynesian Economics and the non-neoclassical programs of the behavioral economics and complexity economics—reflecting a growing recognition that the complexity of the economic reality eludes the explanatory capacity of the reductionist neoclassical framework.