Treatment of the capital account separately from the production and income account of the economy is... a first step, a simplification... justified b… - James Tobin

Ball, Mankiw, Romer and others style themselves as New Keynesians. Their program is to develop improved microeconomic foundations for imperfectly flexible prices. In the process, they hope to illuminate the paradox that individually rational or near-rational behavior can result in significant collective market failures. These are certainly laudable objectives. In the end, I suspect, the program will not change the essential substance of Keynesian macroeconomics. But it will make Keynes more palatable to theorists.

[F]or monetary analysis... assign... to each asset a rate of return <math>r_i (i=1,2,... n)</math> and... [imagine] each sector <math> j (j=1,2,... m)</math> to have a net demand for each asset, <math>f_{ij}</math>, which is a function of the vector <math>r_i</math> and possibly of other variables... [I]n practice, many of the cells are empty...

Keynesian economics at a minimum provides a license for welfare state measures and other government efforts towards redistribution of wealth. The license is the faith that macroeconomic stabilization and prosperity are compatible with a wide range of social policies, that modern capitalism and democracy are robust enough to prosper and progress while being humane and equitable. That faith conflicts with the visions of extreme Right and Left, which agree that extremes of wealth and poverty, of security and insecurity, are indispensable to the functioning of capitalism. Keynesian policies helped to confound those dismal prophecies in the past; I think they will do so again.