The Keynesian School and the Neoclassical Synthesis

In Chapter 5 we outlined the ideas of John Maynard Keynes. In this chapter we look at the work of some theorists who were writing in English in the quarter century after the publication in 1936 of his General Theory and tried to reconcile his work with the neoclassical economic theory that was the subject of chapter 4. Unfortunately the word 'Keynesian' is itself sometimes a source of confusion. For example, the 'Keynesian School' with which this chapter is concerned is often referred to as advocating 'Old Keynesian' economics, to distinguish their ideas both from the 'New Keynesian' theories that emerged after 1975 (which are the subject of chapter 13) and from the 'Post-Keynesian' School (addressed in chapter 14). Similarly, the 'Neoclassical Synthesis' that was developed by the (Old) Keynesians in the two decades after the publication of Keynes's General Theory in 1936, should probably today be denoted as the 'Old Neoclassical Synthesis' (or ONS), to avoid confusing it with the (very different) New Neoclassical Synthesis, which first appeared in the 1990s in the work both of the New Keynesians and of the New Classical School that is discussed in chapter 13.