Keynes & Neoclassical Synthesis

John Maynard Keynes marked a hugely important turning point in the history of Economics. For the first time, Economics had become positive, allowing for differences of opinion. It was firmly a social science, not a collection of observations or ‘natural laws’ condemned to repeat their patterns ad eternum, but could be interfered with and changed. This brought about a chasm in economic thinking: differences of opinion could bring about real differences in the lives of many.

This became all too apparent with the advent of World War II, when economic intervention became all too urgent to help rebuild the lives of all those whose livelihoods had been quashed following a war and a recession that was already 10 years long. The important thing was to decide whether to intervene or leave it to the invisible, all regulating hand.
Keynesianism:

J. M. Keynes, the man who began it all.

Cambridge school, shifting from marginalism to Keynesian ideas.

Keynesianism, its main precursors and ideas.

Neoclassical Synthesis:

Neoclassical Synthesis: how neoclassical economics and Keynesianism reconciled.

John Hicks, the main precursor of the Neoclassical Synthesis.

IS-LL model, which marked the beginning of a new era in macroeconomic analysis.

Phillips curve, which pointed out a relation between unemployment and inflation, starting one of the greatest debates in economic history: can government intervention reduce unemployment?

 

We begin with the seed of dissent: John Maynard Keynes. Keynes is arguably the most important economist of the 20th century. He was singlehandedly responsible for breaking away from what was thought of as economic truth, bringing politics firmly into what was thought of until then as something approaching an exact science. Unorthodox from the get go, he really broke from convention when he published his “General Theory of Employment, Interest and Money”, quashing Smith’s laissez faire attitude to public governance. The fallout from this remains firmly relevant today.