Neoclassical synthesis
The neoclassical synthesis (also neoclassical-Keynesian synthesis ) is still the main theoretical direction of economics today . It combines some critical approaches from John Maynard Keynes with the old dogmas of neoclassical theory and has also been known as Bastard Keynesianism ( Joan Robinson ).
history
Paul Samuelson understood the neoclassical synthesis to mean that if monetary and fiscal policy were used sensibly, mass unemployment and inflation could be overcome, so that with full employment and monetary stability, the old classical truths would apply again in full.
Usually, neoclassical synthesis refers to the connection of the IS-LM model by John Richard Hicks with a neoclassical labor market. In this one, unemployment is the result of rigid wages because of workers' resistance to wage cuts, while Keynes had argued that cuts in money wages when prices fell would usually lead to real wages rising, a real wage cut by lowering nominal wages in deflation is not possible at all. Falling prices would increase the burden of indebtedness, and falling nominal wages would postpone investment and thus increase unemployment with a double impediment to the marginal productivity of capital.
theory
The Neoclassical Synthesis adopted three points from Keynes:
First, the dependence of savings on income. Because the marginal propensity to consume decreases with increasing income, the saving function increases with the income of the economy. Because the savings are always identical to the investment, which is dependent on the interest, according to Keynes a small fluctuation in the investment must lead to wide fluctuations in employment and thus in income in the economy. The total saving is dominated by the investment and a rise in the interest rate must therefore depress income to a level at which the saving is reduced to the same extent as the investment which is dependent on the interest.
Second, the non- neutrality of money , that is, the level of interest influences the investment that is identical to the savings and, via the changed investment, reinforced by the multiplier, the total income of the economy. However, with Keynes and in reality, the central bank sets the interest rate on central bank money, while the IS-LM model easily gives the impression that an equilibrium interest rate is leveling off in the money market. However, when John Richard Hicks was first introduced to his model, he emphasized that the central bank was the only one in his model to determine the supply of money and thus practically set the interest rate. The interpretation as if a certain money supply were fixed and determined the LM curve is unrealistic, because the authorities of monetary policy would adjust the money supply and thus the elasticity of the LM curve is dependent on the elasticity of monetary policy.
Third, Keynes took over the so-called liquidity trap. Mainly because of the price risk associated with long-term bonds, their interest rate will not fall nearly as far as would be necessary for the economy to recover. Therefore, one sees the LM curve in the IS-LM model of Neoclassical Synthesis as a representation of the bond interest at the very bottom, running horizontally above zero, although the interest for central bank money can certainly be set at zero and even below, but the curve should probably be the one Plot the bond market rate and then again represent the money market rate.
In the neoclassical synthesis, a neoclassical labor market (demand and supply on the labor market depending on real wages) and a neoclassical production function are added to the IS-LM model . In principle, the model also shows states of underemployment which, according to the neoclassical theory, cannot be assumed. Insofar as a Keynesian variant of the labor market is dealt with, which assumes a downward fixed wage rate, so that there is no complete flexibility in the labor market, Keynes' explanation is not adopted that, especially in a deflation, falling wages and prices increase unemployment and the Real wages cannot fall at all or insufficiently for macroeconomic reasons, but rather a resistance of workers to wage cuts as the reason for the rigidity of wages.
Another feature of this theory is the assumption that prices are fixed (change slowly) in the short term. The IS-LM models construct a balance between the goods market equilibrium condition, the IS curve (investment = saving) and the money market equilibrium, the LM curve (money supply = money demand) curve. Depending on the intersection of these two curves in a national income / (bond) interest rate diagram, there may be a change in investment activity, for example. The model is thus able to represent the liquidity trap as well as the investment trap and should therefore be applicable to an analysis of fiscal and monetary policy measures in this context.
criticism
The New Classical Macroeconomics was fundamentally critical . By assuming that all economic subjects have the same model of the economy and behave rationally, this derives the strict neutrality of money. In the models of the New Classical Macroeconomics there is therefore no possibility of influencing the economy in the long term through political control. When both the inflation rate and unemployment rose ( stagflation ) as a result of the 1973 oil crisis , this was seen by the monetarists and the New Classical Macroeconomics as confirmation of their criticism, and the neoclassical synthesis lost its influence. Due to the lack of practical suitability of the models of the New Classical Macroeconomics, the New Neoclassical Synthesis of New Keynesianism pushed them back again.
Neo-Keynesians criticized the fact that spillover effects between the goods and labor markets were not taken into account. In addition, the theory lacks a microfoundation of household behavior; thus consumption is derived from the transaction size of national income and not from a neoclassical decision-making calculus that arises from mathematical optimization. In addition, it is criticized that the economic agents save, but that the wealth effects that occur are neglected.
Furthermore, portfolio theoretical considerations do not play a role. The assets that are not used for transaction purposes are either fully invested in bonds or stored interest-free. There is no diversification to minimize risk.
Recent developments
The New Keynesian Economics is sometimes called New Neoclassical Synthesis. Instead of the traditional total models of conventional neoclassical synthesis, microfounded total models are used here. In response to criticism from the monetarists, inflation expectations were taken into account in the New Keynesian Phillips curve.
literature
- Paul A. Samuelson , William D. Nordhaus : Economics . 19th edition. International Edition. McGraw-Hill, Boston et al. MA 2010, ISBN 978-0-07-126383-2 , (German: Volkswirtschaftslehre. The international standard work of macro and microeconomics . 3rd updated edition. Premium edition. Mi-Fachverlag, Landsberg am Lech 2007, ISBN 978-3-636-03113-6 , (premium edition with CD-Rom; study edition without CD-Rom ISBN 978-3-636-03112-9 )).
- Hans-Werner Wohltmann: Fundamentals of the macroeconomic theory. Total analysis of closed and open economies . 2nd revised and expanded edition. Oldenbourg, Munich et al. 1996, ISBN 3-486-23512-5 , ( Woll's textbooks and handbooks for economics and social sciences ).
Web links
- From neoclassical synthesis to AS / AD analysis ( Keynes Society )
- Modigliani's 1944 Wage Rigidity Assumption and the Construction of the Neoclassical Synthesis (PDF; 434 kB)
Individual evidence
- ^ Joan Robinson: Review of Money, Trade and Economic Growth by HG Johnson. In: Economic Journal. 72, September 1962, p. 691.
- ^ Paul Samuelson: Economics. An Introductory Analysis, 7th edition 1967, p. 581
- ^ Keynes: General Theory of Employment, Interest and Money, Duncker & Humblot Berlin 1936, p. 227
- ↑ Keynes: General theory of employment, interest and money, Duncker & Humblot Berlin 1936, p. 226f
- ↑ Keynes: General Theory 1936, pp. 97ff
- ↑ Keynes: General Theory 1936, p. 101
- ↑ Keynes: General Theory 1936, p. 95
- ^ John Hicks: "IS-LM": An Explanation Source: Journal of Post Keynesian Economics, Vol. 3, No. 2 (Winter, 1980-1981), pp. 139-154, p. 150
- ↑ Keynes: General Theory 1936, pp. 194ff
- ↑ Keynes Society: Role and Shape of the Labor Market ( Memento of the original from March 1, 2015 in the Internet Archive ) Info: The archive link has been inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ↑ Lothar Funk and Eckgard Knappe, the contribution of the New Keynesian Economics to explain the unemployment in Europe , in: Hamburger yearbook for economic and social policy: 41st year, Routledge, ISBN 9783161466519 , page 45
- ^ Gabler Wirtschaftslexikon, New Keynesianism
