Neoclassical Theory Of Keynesian Theory

1578 Words Apr 28th, 2015 7 Pages

Where are the Neoclassical elements in the Neoclassical-Keynesian synthesis? In what way does it differ from the Cambridge (UK) view of Keynesian economics?


The Neoclassical-Keynesian synthesis contains theoretical principles and ideas from both the Neoclassical school of economic thought and Keynes’ General Theory. The UK Cambridge Post Keynesian view of economics also contains elements from both these schools, yet the Neoclassical Keynesian synthesis and the UK Cambridge Keynesian bodies of economic thought differ in their views, methods and ideas. The two schools utilise different models to reach the similar conclusion that the economy will tend towards full employment equilibrium in a long run situation – a conclusion that complements a Neoclassical ideology or perspective of capitalism as a market based organisation of society’s production, distribution and consumption. It can be argued, then, that although there are several examples of Neoclassical principles within the Neoclassical Keynesian synthesis, that the general acceptance of a general equilibrium situation in the long run is the defining Neoclassical feature. The paper will first examine the Neoclassical elements in the synthesis school of thought, with reference to its defining IS/LM model, the Phillips Curve and the Solow-Swan Growth model. The UK Cambridge Keynesian school rejects Hicks and Hansens’ IS/LM model, and instead utilises proportionately more Keynesian ideas in its body of…
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