Keynes and the Neoclassical Synthesis: Einsteinian versus by Dario Togati

By Dario Togati

This impressive quantity offers a serious review of Neoclassical Synthesis, lengthy considered as the traditional interpretation of Keynes. Taking factor with this orthodoxy, the writer bargains a special interpretation of the basis of recent macroeconomics, arguing that the topic derives from the clash among examine programmes encouraged through varied paradigms in physics: the Newtonian programme of Hicks and the Einsteinian method of Keynes. unique and provocative in its reflections, Keynes and the Neoclassical Synthesis not just deals a clean interpretation of Keynes yet makes a huge contribution to debates inside of post-Keynesian economics. it is going to hence be of curiosity to all these attracted to Keynes' position within the historical past of monetary proposal and macroeconomic technique.

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Additional resources for Keynes and the Neoclassical Synthesis: Einsteinian versus Newtonian Macroeconomics (Routledge Studies in the History of Economics)

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Keynes goes so far as to make the rigidity of wage-rates the corner-stone of his system. (Hicks 1946:265–6) This passage shows once again the crucial benchmark role that the ideal type of perfect competition plays in Hicks’s analysis. In particular, it allows him to analyse the behaviour of real-world economies in terms of deviations from the type as a result of empirical imperfections which impair the smooth working of the price mechanism. Concluding remarks This chapter has sought to define one of the two basic paradigms of modern macroeconomic theory: namely, Hicks’s ‘pure theory’ as developed in Value and Capital.

12 Two aspects of this method need to be stressed. The first is its universal applicability. As Einstein pointed out: The great achievements of mechanics in all its branches, its striking success in the development of astronomy, the application of its ideas to problems apparently different and non-mechanical in character, all these things contributed to the belief that it is possible to describe all natural phenomena in terms of simple forces between unalterable objects. (Einstein and Infeld 1938:57–8) The second aspect is that the method attempts to explain all phenomena on the grounds of extremely simplified models resulting from the aggregation of the elementary particles.

Not surprisingly, Hicks, like all general equilibrium theorists, relies on the auctioneer to account for the impersonal action of the market (the invisible-hand paradigm). The second function is to allow Hicks to adopt the simplifications needed to construct macroeconomics. Atomism, for example, greatly simplifies the treatment of preferences by reducing them to exogenous data, whereas the representative agent device, together with the auctioneer imposes coordination on the economic system and, as a result, both the smooth working of the price mechanism and the attainment of full equilibrium become a matter to postulate (meaning that flexible prices imply market clearance).

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