LESSONS FROM THE WORLD CRISIS FOR THE ECONOMIC THEORY

Abstract

The study makes an analysis of the role of neoclassical theory in the last decades of the 20th he current global crisis is a crucial point not only for economic practice, but also for economic theory. Adam Smith, the father of modern economists, argued, that the pursuit of self-interest (profit-making by competitive firms), as if guided by an invisible hand, led to general wellbeing. In the course of decades the essence of A. Smith’s doctrine was presented as over-simplified almost by only two phrases: of the „invisible hand” and of the state as a „night guard”. It has been known for many years that such conclusions do not hold when there is imperfect competition and incomplete information – and all markets, especially the financial ones, are characterized by imperfect information. The reason that the invisible hand seems invisible is that it is not there. The pursuit of self-interest by Enron and WorldCom did not lead to societal wellbeing, and the pursuit of self-interest by those in the financial and property sectors brought the American and the world economy to the brink of the abyss in 2008. century and its responsibility for the current world economic crisis. It shows the fast revival of Neo-Keynesian theory and the anti-cyclical policy based on it, as well as its role for the world to exit the recent crisis. The emphasis is on the positive role which this theory can play over the next years and decades. The study tries to draw the outlines of the new theoretical synthesis sought for the functioning of economy by using the positive ideas of the economic theories prevailing hitherto and introducing new original theoretical ideas. On the basis of the above considerations the need of a theoretical framework for the state’s role in the economy management in countries like Republic of Bulgaria is substantiated and some concrete recommendations are made in this sphere.