The Attempt to Revitalize Keynes' Theory

Abstract

The article gives a summary of the renewal attempts of the only, through decades dominant general economic theory, the
Keynesian economics. Because of the lack of microeconomic bases and the changes happened on the commodity-, labour-, and
money markets of the modern economies, the Keynesian theory cannot give any more explanations and directions for such
macroeconomic phenomena as the unemployment and the cyclic fluctuation of the economy, which the sensitivity of those living in
market economies has significantly grown to.
A very important recognition of the economic tendency called ‘new Keynesian’ is that the lack of perfect competition can
be blamed for the existence of economic cycles. The market imperfectness, which -from the number of competitors to the
imperfectness of the flow of information- can show many different faces, appears also in creation of microeconomic bases, where
the new Keynesian school can show important successes. From the article we can learn about the areas most often examined by the
new Keynesians: the most important models of real- and nominal inelasticity of prices and wages as well as the models of implicit
contracts existing in the form of long-term wage agreements, the menu costs, the rapid market externals, and the models of effective
wages. By surveying the models it can be established that the crowd of wide-ranging models elaborated by the new Keynesian
researchers does not make up a consistent theory. For the economists following in Keynes’s footsteps and searching the explanations
of the phenomena of economies operating with imperfect markets, the biggest challenge is the rethinking of the theory uniting the
microeconomic models.