Modern macroeconomics flourished in its pursuit of the secrets of long-run economic growth, but it neglected short-run economic problems. In the long run, prices are flexible, and the growth of the economy is determined by the growth in the ability to supply goods and services. But in the short run prices are not flexible. Growth can be held back because prices are too high and, as a result, demand is too low. Keynes made his name by analyzing short-run problems caused by the stickiness or even rigidity of some important prices. But these Keynesian ideas were abandoned by modern macroeconomics.
Why Keynes is Important Today (2014)
