Neoclassical synthesis

The neoclassical synthesis, or the neoclassical–Keynesian synthesis,[1] was a post-World War II academic movement in economics that worked towards absorbing the macroeconomic thought of John Maynard Keynes into neoclassical economics.[2] The resultant macroeconomic theories and models are termed neo-Keynesian economics. Mainstream economics was largely dominated by the synthesis until the 1970s, being largely Keynesian in macroeconomics and neoclassical in microeconomics.[3]

Much of neo-Keynesian economic theory was developed by John Hicks and Maurice Allais, and popularized by the mathematical economist Paul Samuelson. The process began soon after the publication of Keynes' General Theory with the IS/LM model (investment saving–liquidity preference money supply) first presented by John Hicks in a 1937 article.[4] It continued with adaptations of the supply and demand model of markets to Keynesian theory. It represents incentives and costs as playing a pervasive role in shaping decision making. An immediate example of this is the consumer theory of individual demand, which isolates how prices (as costs) and income affect quantity demanded.

Samuelson appears to have coined the term "neoclassical synthesis", and helped disseminate the resultant work, partly through his technical and academic writing, and also via his influential textbook, Economics.[5][6]