Jan Toporowski: Michał Kalecki and Oskar Lange in the 21st Century

It is possible to identify in The General Theory and Kalecki's work key ideas that they had in common.  The first is that in a capitalist economy output and employment are determined by business investment, so unless investment is high enough the economy is unlikely to be at full employment.  Secondly that investment determines saving, rather than the other way around.  Both men denounced the doctrine of the social value of thrift that so comforted the complacent Victorian bourgeoisie and that just made such a comeback today.  Finally, contrary to the Neoclassical and the Ricardian-Marxist view both men argued that wage rises would increase employment rather than decreasing it.  Underlying this commonality of view on how the capitalist economy works was a fundamental principle of the economic method that Kalecki explicitly employed to great effect and Keynes in a somewhat more haphazard way: the principle of the circular flow of income.  This is the idea that incomes are determined by expenditure decisions, rather than being decided in complex games of exchanging resources, capital or labor.  The principle goes back to the work of the French Physiocrat François Quesnay but had been lost to political economy by the 19th century with the ascendency of the idea that prices integrate individual exchange decisions, so all you need is correct prices.  Nevertheless, a hundred years ago the great Joseph Schumpeter recognized the importance of the circular flow of income...

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Jan Toporowski on Julio López on Kalecki

EH.net published in their book review series a nice one on Julio López and Michaël Assous book titled Michal Kalecki, just published by Palgrave-Macmillan. Jan says:

"The excellence of Tony Thirlwall’s series for Palgrave on Great Thinkers in Economics is confirmed by this volume on Michał Kalecki, written by Kalecki’s former student, Julio López Gallardo (Professor at UNAM, Mexico City), and Michaël Assous (Maître de Conferences at the University of Paris, Panthéon-Sorbonne). The book is important in part because of the very enigmatic quality of Kalecki’s ideas which, expressed by him in a dry, lapidary style with few references, appear to have come from nowhere to anticipate the Keynesian Revolution that Keynes labored so long to wrest from the legacy of Alfred Marshall. As Robert Solow, quoted in this book (p. 214), remarked: “Michal Kalecki ... seems to have sprung, full-grown, from his own brow; and his important work on macroeconomics is written not in opposition to the orthodoxy of his time, but in utter independence of it."

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