Table of Contents

Contemporary Post Keynesian Analysis

Contemporary Post Keynesian Analysis

Edited by L. Randall Wray and Mathew Forstater

Original articles by leading scholars of post Keynesian economics make up this authoritative collection. Current topics of the greatest interest are covered, such as: perspectives on current economic policy; post Keynesian approaches to monetary theory and policy; economic development, growth and inflation; Kaleckian perspectives on distribution; economic methodology; and history of heterodox economic theory. The contributors explore a variety of prevailing issues including: wage bargaining and monetary policy in the EMU; the meaning of money in the internet age; stability conditions for small open economies; and economic policies of sustainable development in countries transitioning to a market economy. Other enduring matters are examined through the lens of economic theorists – Kaleckian dynamics and evolutionary life cycles; a comparison between Keynes’s and Hayek’s economic theories; and an analysis of the power of the firm based on the work of Joan Robinson, to name a few.

Chapter 13: Kalecki’s Theory of Income Distribution: The Answer to a Maiden’s Prayer?

Anthony J. Laramie, Douglas Mair and Peter J. Reynolds

Subjects: economics and finance, post-keynesian economics


1 Anthony J. Laramie, Douglas Mair and Peter J. Reynolds In short, Kalecki’s formulation is not the answer to any maiden’s prayer. (Bronfenbrenner, 1971, p. 411) INTRODUCTION As our opening quotation suggests, Kalecki’s theory of income distribution has not met with universal endorsement. The most persistent criticism that it is a tautology is a canard that Kalecki himself as well as more recent commentators denied (King and Regan, 1976). However, there are still weaknesses in Kalecki’s theory that need to be addressed. A problem identified, for example, by Mitchell (1988) and Sawyer (1999), is Kalecki’s failure to furnish in Theory of Economic Dynamics (1954) a satisfactory explanation of the process by which the price/cost mark-ups between competing firms are established and maintained. In Kalecki’s theory, the price/cost mark-up is an important determinant of the degree of monopoly and, hence, of the distribution of income. Kalecki’s failure to provide a convincing explanation of this process weakens his theory. Mair and Laramie (forthcoming) have proposed a solution that we discuss below. A second criticism, which is the focus of this chapter, is Kalecki’s failure to adduce empirical evidence in support of his theory (King and Regan, 1976). In light of what we consider to be fundamental weaknesses of the marginal productivity theory of income distribution – the Cambridge controversy and all that – it is all the more important to demonstrate that Kalecki’s theory can be tested empirically. An early attempt was Reynolds (1983) and in this chapter we seek to improve on...

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