History of economic thought
Post World War II and globalization (mid to late 20th century)

The globalization era began with the end of World War II and the rise of the U.S. as the world's leading economic power, along with the United Nations. To prevent another global depression, the victorious allies countries forgave Germany its war debts and used its surpluses to rebuild Europe and encourage reindustrialization of Germany and Japan. In the 1960s it changed its role to recycling global surpluses.

After World War II, Canadian-born John Kenneth Galbraith (1908–2006) became one of the standard bearers for pro-active government and liberal-democrat politics. In The Affluent Society (1958), Galbraith argued that voters reaching a certain material wealth begin to vote against the common good. He also argued that the " conventional wisdom " of the conservative consensus was not enough to solve the problems of social inequality. In an age of big business, he argued, it is unrealistic to think of markets of the classical kind. They set prices and use advertising to create artificial demand for their own products, distorting people's real preferences. Consumer preferences actually come to reflect those of corporations – a "dependence effect" – and the economy as a whole is geared to irrational goals. In The New Industrial State Galbraith argued that economic decisions are planned by a private-bureaucracy, a technostructure of experts who manipulate marketing and public relations channels. This hierarchy is self-serving, profits are no longer the prime motivator, and even managers are not in control. Because they are the new planners, corporations detest risk, require steady economic and stable markets. They recruit governments to serve their interests with fiscal and monetary policy, for instance adhering to monetarist policies which enrich money-lenders in the City through increases in interest rates. While the goals of an affluent society and complicit government serve the irrational technostructure, public space is simultaneously impoverished. Galbraith paints the picture of stepping from penthouse villas onto unpaved streets, from landscaped gardens to unkempt public parks. In Economics and the Public Purpose (1973) Galbraith advocates a "new socialism" as the solution, nationalising military production and public services such as health care, introducing disciplined salary and price controls to reduce inequality.

In contrast to Galbraith's linguistic style, the post-war economics profession began to synthesize much of Keynes ' work with mathematical representations. Introductory university economics courses began to present economic theory as a unified whole in what is referred to as the neoclassical synthesis. " Positive economics " became the term created to describe certain trends and "laws" of economics that could be objectively observed and described in a value-free way, separate from " normative economic " evaluations and judgments.

The Paul Samuelson 's (1915–2009) Foundations of Economic Analysis published in 1947 was an attempt to show that mathematical methods could represent a core of testable economic theory. Samuelson started with two assumptions. First, people and firms will act to maximize their self-interested goals. Second, markets tend towards an equilibrium of prices, where demand matches supply. He extended the mathematics to describe equilibrating behavior of economic systems, including that of the then new macroeconomic theory of John Maynard Keynes. Whilst Richard Cantillon had imitated Isaac Newton 's mechanical physics of inertia and gravity in competition and the market, the physiocrats had copied the body's blood system into circular flow of income models, William Jevons had found growth cycles to match the periodicity of sunspots, Samuelson adapted thermodynamics formulae to economic theory. Reasserting economics as a hard science was being done in the United Kingdom also, and one celebrated "discovery", of A. W. Phillips, was of a correlative relationship between inflation and unemployment. The workable policy conclusion was that securing full employment could be traded-off against higher inflation. Samuelson incorporated the idea of the Phillips curve into his work. His introductory textbook Economics was influential and widely adopted. It became the most successful economics text ever. Paul Samuelson was awarded the new Nobel Prize in Economics in 1970 for his merging of mathematics and political economy.

American economist Kenneth Arrow 's (1921–2017) published Social Choice and Individual Values in 1951. It consider connections between economics and political theory. It gave rise to social choice theory with the introduction of his " Possibility Theorem ". This sparked widespread discussion over how to interpret the different conditions of the theorem and what implications it had for democracy and voting. Most controversial of his four (1963) or five (1950/1951) conditions is the independence of irrelevant alternatives.

In the 1950s Kenneth Arrow and Gérard Debreu (1921–2004) developed the Arrow–Debreu model of general equilibria. In 1963 Arrow published a paper which founded Health Economics.

In 1971 Arrow and Frank Hahn published General Competitive Analysis (1971), which reasserted a theory of general equilibrium of prices through the economy. In 1971, US President Richard Nixon 's had declared that " We are all Keynesians now ", announcing wage and price controls. He lifted this from a comment by Milton Friedman in 1965 which formed a Time.
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