Disequilibrium Macroeconomics: From Its Brief Ascent to the Rapid Decline

The neoclassical synthesis prevailed for decades as the authentic interpretation of Keynes. This dominance is attributed, on the one hand, to the simplicity of the presentation of Keynesian ideas and, on the other hand, to the provision of the necessary rationale for the contemplation of fiscal and monetary policy. The neoclassical synthesis developed by Hicks, Samuelson, and Modigliani, was considered the true general theory, as it could be applied to any stage of the business cycle and not only during depressions, as the General Theory of Keynes. The depressions are caused either by rigid money wages, or because the rate of interest is in the liquidity trap region, or, perhaps even worse, a combination of rigidity of money wages and liquidity trap interest rate. However, once the economy is at its full employment stage, through appropriate government intervention, the system operates according to (neo)classical theory.