The Return of Keynes

A graduate student in a typical American or European university studying the subject of macroeconomics would be taught that the macroeconomy can be represented by representative consumers and firms who continuously optimize a multi-period plan, and in order to do so, use all available information including the one embedded in the model.These consumers and firms not only perfectly understand the complex intricacies of the workings of the economy, they also know the statistical distributions of all the shocks that can hit the economy.As a result, they can make scientifically founded probabilistic statements about all future shocks.In this world of God-like creatures, there is no uncertainty, there is only risk.Coordination failures do not occur because representative agents internalize all possible externalities.Bankruptcies of firms and consumers are impossible.