However, even among postkeynesians, such a proposition is hardly common ground. This paper assesses the role of the degree of monopoly in kaleckis theory of pricing and income distribution. Kalecki s analysis kalecki 1971 considered industrial firms which set price as a markup on their prime costs while holding excess capacity although he pointed out that primary materials had demanddetermined prices, stressed the distribution of income between workers who receive wages and capitalists who receive profits and who have different savings behaviors the latter saving a higher. What do we know about the labor share and the profit share. The crucial point seems to be that kalecki s pricing theory, relying on the concept of a degree of monopoly, provides the basis for a theory of distribution that shifts the focus away from the struggle between capitalists and workers and towards imperfections in 5. A lasting virtue of kalecki s statement, and an element absent in keynes, was his focus on the distribution of income in a monopoly capitalist economy. In his lifetime, polish economist michal kalecki was one of the unsung heroes of macroeconomics and a potent lesson in why, in economics, one should always publish in english. Munich personal repec archive kalecki s theory of income determination and modern macroeconomics chilosi, alberto 1 april 2000 online at. At du in recent years i have been teaching the following courses. Income shares are influenced both by the markups firms are able to establish in oligopolistic markets and by the level of effective demand. Since profits in a given short period are determined by capitalists decisions as to their consumption and investment formed in the past, the factors determining the distribution of income will affect not real profits but the real wage bill, and con.
By 1935 he outlined his theory of employment, demolished the thenorthodox remedy for a depressionthat is, wage cuttingand pinpointed the importance of investment for economic dynamics. Two questions lead to a better understanding of the literature. Iesias economics mains kaleckis theory of income distribution. International trade and income distribution with oligopolistic markups and partial passthrough robert a. Kalecki s macroeconomics is notable for having been the first to be built, unlike keynes but alike the contemporary new keynesian macroeconomic models, in an imperfectly competitive framework and, at the same time, for linking the theory of distribution, on the one side, and the theory of income determination, on the other. Private investment determines the economic dynamics of a capitalist economy. Kaldor kalecki demand and investment oriented theories of cycles. This provides the link between the monetary theory of kalecki and minsky and modern circuit theory. Income distribution is the other pillar of kalecki s efforts to build a business cycle theory. Major works of michal kalecki mr keyness predictions, 1932, przeglad socjialistyczny an essay on the theory of the business cycle, 1933. The former was the determinant of the pricing decisions of firms, which set their prices by markingup their average prime costs comprising wages and materials. Kalecki s discovery of the general theory independently of keynes, as did king 20, p.
Financial markets and monetary theory and policy for upperdivision undergrads and m. In short, kalecki s theory of pricing and distribution consisted of positing a link between what he called the degree of monopoly of firms and the functional distribution of income. Kalecki s theory of effective demand is therefore inseparably linked with the theory of distribution and growth. Kalecki s theory of income distribution is based, notwithstanding the sometimes heroic simplifications on which it rests, on the basic idea that the. Clark in 1899 and then modified by philip wicksteed. Apr 01, 2000 kalecki s theory of income distribution is based, notwithstanding the sometimes heroic simplifications on which it rests, on the basic idea that the structure of distribution in a market economy depends on the structure of market imperfections and of market power. With overhead labour, changes in effective demand, as well as changed markups, affect the share of profits. To do this, kalecki assumes that industries compete in imperfectly competitive markets, more particularly in oligopolistic markets where firms set a markup on their variable average costs raw materials, wages of employees on the shop floor that are supposed to be variable in order to cover their overhead costs salaries to senior management and administration, to obtain a certain amount of profit. We begin by examining kaleckis theory of prices, focusing on the meaning and role of the degree of monopoly. The theoretical and analytical relationship between our model and the post key. He introduced a promising alternative theory of distribution, even if it lacked a comprehensively formulated theory of market behaviour and was in some respects deficient in dealing with the question of investment decisions.
This paper assesses the role of the degree of monopoly in kalecki s theory of pricing and income distribution. George feiwel offers an indepth examination of this in his book, the intellectual capital of michal kalecki 3, but kalecki is easier to comprehend if discovered through his own work. Distribution undetermined leaves income indeterminate, in a two class world with differing inclinations to save. The e ects of an exogenous distributional shock in favor of wages are studied within the framework of an imperfectly competitive economy in which rms form.
According to my second theory the relative share of profits in national income is determined by the degree of monopoly kalecki 1991, p. The primary source for this adventure is michal kalecki. In 1933, kalecki published his first analysis of the business cycle under capitalism, arguing that it was due to the instability of investment, which in turn was caused by fluctuations in capitalists. Some theories of income distribution of distribution, the rudiments of which are contained in the treatise on money and which has been further developed by boulding, hahn, kaldor, kalecki, and robinson. In both, as we will see, distribution occupies an important place. Although kalecki claimed to have anticipated much of the principles stated in keyness general theory, his articles 1933, 1935 were. Postkeynesian economics spliced kalecki s price and business cycle theory onto more orthodox keynesian concerns about aggregate demand and full employment. Kalecki attempted to explain labours share in terms of the overall degree of monopoly in the economy. Blackwell publishing for the royal economic society. In the section that follows, the key features of german monetary theory that influenced kalecki and minsky are outlined. Second, income distribution, and its effects on aggregate economic behaviour, plays a central role in kalecki, whereas keynes never appreciated that a consequence of the general theory had to be the abandonment of the marginal productivity theory of income distribution rothschild, 1961. Minsky is usually placed with the postkeynesian monetary tradition see sawyer 1985, chapter 5, sawyer.
Michael kalecki political aspects of full employment1 1 political quarterly, 1943 i 1. Kalecki s 1943 reelaboration of his theory of distribution employed his pricing theory in support of some of the analysis. Kalecki s theory on full employment, resulting in the subsequent rise of antiinflationary neoliberal policies can be seen in the real changes of global income between 1988 to 2008. Joan robinson has attacked the marginal productivity theory on various grounds. Kalecki scored a breakthrough by introducing the degree of monopoly into his macrodynamic model. The bhadurimarglin postkaleckian model in the history. Effective demand, employment, distribution, growth, marx, kalecki, keynes. The most celebrated microeconomic theory is the marginal productivity theory of distribution. Michal kaleckis distribution theory or degree of monopoly theory of distribution has been suggested by kalecki in order to determine the. Kalecki develops his theory of distribution from features of pricing in imperfect markets.
Essai dune theorie du mouvement cyclique des affaires, 1935, revue deconomie politique. For apart from the marginalists proper, the group would have to include such nonmarginalists or quasimarginalists from the point of view of distribution theory as the walrasians and the neowalrasians,1 as well as the imperfect. Prices and distributive antagonism in the work of smith and. Kalecki s analysis kalecki 1971 considered industrial firms which set price as a markup on their prime costs while holding excess capacity although he pointed out that primary materials had demanddetermined prices, stressed the distribution of income between workers who receive wages and capitalists who receive profits and who have different savings behaviors the latter saving a higher proportion of their income than the former, assumed that investment is determined by. As keynes 1979 in the drafts leading to the general theory 1936. However, and despite their insights, these theories alone fail to fully explain the current deterioration of income distribution. To do this, kalecki assumes that industries compete in imperfectly competitive markets, more particularly in oligopolistic markets where firms set a markup on their variable average costs raw materials, wages of employees on the shop floor that are supposed to be variable in order to cover their overhead costs. Kalecki are analyzed,in regards with neoclassic, neokensian, neomarxist and neoricardian economists 1. He offered a theory of distribution that was independent of the neoclassical tradition.
Economist branko milanovic published in a 2012 world bank working paper, the nowfamous elephant graph of the global income distribution figure 1. Kalecki considers an exogenous increase in the nominal wage rate and. However, marxs theory in volume 1 is not just about the surplusvalue produced by a single capital. In chapter i we argued that in the authors theory output and. The newkensyan theory keynes did not deal with the growth of theory of distribution. Kaleckian economics may be broadly defined as the economic theories enunciated by michal kalecki 18991970 and the extensions of those theories by economists who were influenced by him. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided. In his essays in the theory of business cycle published in polish in 1933, kalecki clearly stated the principle of effective demand in mathematical form. Kalecki s 193940 and 1941 publications elaborate the following equation kalecki, 1941, p.
Prices in these markets are usually based on markups selected by firms. The theories of distribution can be broadly divided into two categories, viz. Iasmains economicsoptional previous years question paper. This is then followed by a section explaining how kalecki was brought into the german monetary tradition, and what elements of his work reflect that tradition. Kaleckis theory of prices and distribution springerlink. Many other macro theories have been developed on the basis of keynesian ideas. Oct 31, 2014 kalecki s approach differed from keyness in that kalecki developed the theory of effective demand in a dynamic context and explicitly considered distributional issues right from the start. Alternative theories of distribution income economics. The serious question for keynesian economics that arises from any comparison of kalecki with keynes is why, if the two men had made common discoveries, did their closest collaboration in cambridge in 1939 end in such apparent. Iasmains economicsoptional previous years question. Keynes kaldor kalecki demand and investment oriented theories of cycles. Blecker professor of economics american university washington, dc 200168029 usa email. This is an important idea which leads to a deep understanding of the way the capitalist economy actually works and which constitutes a lasting contribution to modern economics.
Kalecki s from the theory of growth of the capitalist economy, to the theory and practice of socialist economic planning, to original criteria for the selection of investment projects. Kaleckis theory of distribution of the national product. Finally, kaleckis theory of income distribution allows defining a new analysis of the wagesemployment relationship, first in reconsidering the relationship between. Introduction we have shown that income distribution plays a key role in kalecki s theory of effective demand.
Tracy mott associate professor and department chair research. My research is generally concerned with extending the ideas of michal kalecki and john maynard keynes on the relation of financial considerations and income distribution to economic activity, with philosophical and doctrine. Also explain the implications of an increase in the wage level and a reduction in the saving rate on the distribution of income. This paper explores long wave theory, including kondratieffs theory of cycles in. Prices and distributive antagonism in the work of smith. Kalecki pays more attention to the degree of monopoly in his distribution theory. Rather, it is about what all capitals have in common. During the 1950s, kalecki was influential in the monopoly capitalism school of marxists, through the work of paul sweezy and josef steindl. Introduction the monetary theory of michal kalecki and hyman p.
Michat kalecki s writings contain a theory of distribution that combines microeconomic and macroeconomic aspects of the economy. Kalecki only developed rudiments of an approach to the theory of growth in capitalist economies, and the theory of development. Kaleckis theory of income determination and modern. Pdf kaleckis pricing theory neri salvadori academia. Marxs theory of the distribution of surplusvalue in volume 3 of capital it is argued in this paper that the overall main subject of volume 3 of capital is the distribution of surplusvalue, i.
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