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In Search of Lost Time: The Neoclassical Synthesis

  • Michel De Vroey

    ()

  • Pedro Garcia Duarte

    ()

Present-day macroeconomics has sometimes been dubbed ‘the new neoclassical synthesis’, suggesting that it constitutes a reincarnation of the neoclassical synthesis of the 1950s. This paper assesses this understanding. To this end, we examine the contents of the ‘old’ and the ‘new’ neoclassical syntheses. We show that the neoclassical synthesis originally had no fixed content, but two meanings gradually became dominant. First, it designates the program of integrating Keynesian and Walrasian theory. Second, it designates the methodological principle that in macroeconomics it is better to have alternative models geared towards different purposes than a hegemonic general-equilibrium model. The paper documents that: (a) the first program was never achieved; (b) Lucas’s criticisms of Keynesian macroeconomics eventually caused the neoclassical synthesis program to vanish from the scene; (c) the rise of DSGE macroeconomics marked the end of the neoclassical synthesis mark II; and (d) contrary to present-day understanding, the link between the old and the new synthesis is at best weak..

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File URL: http://www.fea.usp.br/feaecon/RePEc/documentos/PedroDuarteN07WP.pdf
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Paper provided by University of São Paulo (FEA-USP) in its series Working Papers, Department of Economics with number 2012_07.

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Date of creation: 07 May 2012
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Publication status: Published
Handle: RePEc:spa:wpaper:2012wpecon07
Note: Published in the "B.E. Journal of Macroeconomics", Jan. 2013, 13(1). http://www.degruyter.com/view/j/bejm.2013.13.issue-1/bejm-2012-0078/bejm-2012-0078.xml
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