Introduction

F. Modigliani’s seminal article on Keynes’s involuntary unemployment and wage rigidity is recalled among the ones that set the basis of the neoclassical synthesis, that is, an interpretation of Keynes’s macroeconomics within the neoclassical framework. Modigliani’s emphasis on market failures and his focus on wage and price behavior to distinguish between classical and Keynesian economics and on the active role of policy makers have a background that goes beyond American Keynesianism. Modigliani and Richard Brumberg worked contemporarily on the microeconomic and macroeconomic aspects of their theory and established explicit connections with the Keynesian theory. During the 1950s Modigliani was also working on a treatise on the theory of money and interest in a general equilibrium framework, and summarized these ideas in the 1963 article devoted to further develop the Keynesian framework he had set in 1944. The chapter also presents an overview on the key concepts discussed in this book.