Neoclassical Theory Of Keynesian Theory - 1578 Words

ECOP2011 Where are the Neoclassical elements in the Neoclassical-Keynesian synthesis? In what way does it differ from the Cambridge (UK) view of Keynesian economics? Intro 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 f eature. 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 ofShow MoreRelatedComparison Of RawlsTheory Of Justice1724 Words   |  7 Pages Rawls’ Theory of Justice and Neoclassical theory are similar, but not fundamentally compatible. While Rawls does spend a lot of time focusing on specialization and private ownership, both of which Adam Smith and the neoclassical school strongly endorse. However, there are certain contradictions between the Rawls’ Theory of Justice and neoclassical thought that Bradford brings up in his paper â€Å"The Economics of Rawlsian Justice: Can it be Neoclassical?†. These contradictions are mainly the disparitiesRead MoreNeoclassical Economics Vs. Ke ynesian Economics1583 Words   |  7 Pagesschools thought that are neoclassical economics and Keynesian economics.Therefore, this essay will compare the two economics school thought. The neoclassical economics believes that free market tends to be equilibrium and Keynesian economics asserts that the periodical financial crisis is a fact,but it can be solved by appropriate government intervention. 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May be theRead MoreClassical and Neoclassical Economists: Adam Smith and John Maynard Keynes1289 Words   |  6 Pageshow those economic ideas, revolutionary theories of m any economists, that helped to shape the economic structure as we know it now, through many individuals and school of economic though that has existed through the ages. These schools are â€Å"the mercantilists, the physiocrats, the classical economists, Marxian economics, the neoclassical economists and the monetarist economics. For this essay I will only refer to the classical economists and the neoclassical economists. The two most influential economistsRead MoreEssay on Keynesian Revolution1244 Words   |  5 PagesKeynesian Revolution Classical economic theory assumed that a ‘free-market’ economy is a ‘self regulating’ system that continually tends toward a full-employment equilibrium, with optimum economic benefits for everyone. Therefore, the best government economic policy is to ‘excuse itself’ and give utmost freedom to individual enterprise. A key element of the ‘Keynesian revolution’ was its demonstration that these basic assumptions are false, both in theory and practice, and its assertionRead MoreKayne vs Hayek1370 Words   |  6 Pagesoutput, consumption, unemployment, inflation, savings, investment, international trade and international finance. The two major theories of economics are Classical Economics and Keynesian Economics. Classical economists believe that markets function very well, will quickly react to any changes in equilibrium and that a â€Å"laissez faire† government policy works best. Keynesian economists believe that markets react very slowly to changes in equilibrium (especial to changes in prices) and that active government