Kalecki’s Theory of Profits and Output

Kalecki formulated the principle of effective demand in the context of his theory of economic dynamics, dealing with the equilibrium of income occurring at a given point of the cycle. Thus, he put forward his short-term analysis in the framework of a dynamic process, whereby the economy is subject to a long-run trend and cycles. The short- and long-term aspects of his analysis were a part of his methodology; first, allowing centring on situations he labelled “quasi-equilibria” or “shortperiod equilibria” situations in which the stock of capital is assumed given, and second, explaining how, as soon as the capital stock is assumed to vary, the economy is likely to enter in a continual movement through a series of short-period equilibriums or quasi-equilibriums.