Neoclassical synthesis is a postwar academic movement in economics that attempts to absorb the macroeconomic thought of John Maynard Keynes into the thought of neoclassical economics. Mainstream economics is largely dominated by the resulting synthesis, being largely Keynesian in macroeconomics and neoclassical in microeconomics.
The theory was mainly developed by John Hicks, and popularized by the mathematical economist Paul Samuelson, who seems to have coined the term, and helped disseminate the "synthesis," partly through his technical writing and in his influential textbook, Economics. The process began soon after the publication of Keynes' General Theory with the IS/LM model first presented by John Hicks in a 1937 article. 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.
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Famous quotes containing the word synthesis:
“It is in this impossibility of attaining to a synthesis of the inner life and the outward that the inferiority of the biographer to the novelist lies. The biographer quite clearly sees Peel, say, seated on his bench while his opponents overwhelm him with perhaps undeserved censure. He sees him motionless, miserable, his head bent on his breast. He asks himself: “What is he thinking?” and he knows nothing.”
—Andre Maurois (1885–1967)