The Neoclassical Synthesis Jumbled Together the Marshallian and Walrasian Approaches to Price Determination with Keynesian Macroeconomics

After World War II, a new and stifling orthodoxy known as the “neoclassical synthesis” had descended upon economics, especially in the United States. This so-called “synthesis” was actually a hodgepodge of the three disparate approaches that had overwhelmed the Mengerian causal-realist approach in the interwar period. It jumbled together the Marshallian and Walrasian approaches to price determination with Keynesian macroeconomics. The first two approaches focused narrowly on analyzing the determination of unreal, equilibrium prices either in single markets (partial equilibrium) or in all markets simultaneously (general equilibrium). Keynesian macroeconomics denied the efficacy of the price system altogether in coordinating the various sectors of an economy confronted with the “failure of aggregate demand.”

--Joseph T. Salerno, introduction to the second edition of Man, Economy, and State with Power and Market, by Murray N. Rothbard (Auburn, AL: Ludwig von Mises Institute, 2009), xxi-xxii.