Relying on historical evidence as well as on rational arguments, this article reconstructs the birth of the neoclassical theory as a key episode of the parallel though interconnected evolution of the aggregate theories of growth and oscillations. As a by-product, it explains why that theory could be invented, practically at the same time, by two independent researchers, Solow and Swan. In our argument, the neoclassical theory represented a partially successful attempt to overcome the difficulties arising in the Harrodian interpretation of the classical macrodynamics program, which had led to its failure to produce a unified theoretical explanation of economic dynamics. The way out was seen in the adoption of the general equilibrium research agenda, shifting thus the focus on existence and stability issues. This, however, has implied the acceptance of the divorce of the theory of growth from the theory of fluctuations, a divorce that has prevailed until recently. We maintain that the conceptual limitations and high costs in terms of interpretive capacity involved in the neoclassical solution account for the repeated emergence of certain unanswered questions.
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Lionello F. Punzo; A Nonlinear History of Growth and Cycle Theories. History of Political Economy 1 December 2009; 41 (Suppl_1): 88–106. doi: https://doi.org/10.1215/00182702-2009-018
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