Recent Theoretical Progress in Economics and Its Impact on Economic Policy

Up to the ‘70s, one could distinguish an apparent consensus in economics, in both theory and practice, a unity of opinion along the lines of the Keynesian doctrine. However, in the early „70s, this unity collapsed, which led to a theoretical division in economic science. This division resulted in a fervent search for a comprehensive macroeconomic theory to replace the Keynesian paradigm and to handle the imbalances we experience today. This paper reviews the most important theoretical contributions to economic science during the past four decades and analyzes to what extent the theoretical progress has influenced economic policy.