In Search of Lost Time: The Neoclassical Synthesis

BE Journal of Macroeconomics, Forthcoming

32 Pages Posted: 12 Jan 2013

See all articles by Michel De Vroey

Michel De Vroey

Catholic University of Louvain

Pedro Garcia Duarte

University of São Paulo (FEA-USP) - Department of Economics

Date Written: November 15, 2012

Abstract

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.

Suggested Citation

De Vroey, Michel and Garcia Duarte, Pedro, In Search of Lost Time: The Neoclassical Synthesis (November 15, 2012). BE Journal of Macroeconomics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2199668

Michel De Vroey

Catholic University of Louvain ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

Pedro Garcia Duarte (Contact Author)

University of São Paulo (FEA-USP) - Department of Economics ( email )

Av. Prof. Luciano Gualberto, 908
Departamento de Economia
Sao Paulo, SP, 05508-010
Brazil

HOME PAGE: http://www.usp.br/feaecon/perfil.php?u=110

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