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There Are Major Differences between Kalecki’s Theory of Employment and Keynes’s General Theory of Employment, Interest, and Money

In: Interpreting Keynes for the 21st Century

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  • Paul Davidson

Abstract

Michal Kalecki came to Cambridge as Keynes was completing his General Theory of Employment, Interest and Money. Joan Robinson noted that “without any contact either way, Michal Kalecki had found the same solution. … The interesting thing is that two thinkers, from completely different political and intellectual starting points, should come to the same conclusion” (Turner, 1989, p. 63). The question I would like to explore in this chapter is whether these two geniuses, Kalecki and Keynes, not only independently discovered the principle of effective demand but also came to the identical explanation of why there was no automatic market mechanism to assure full employment whenever a decline in investment spending occurred in an entrepreneurial economy. This is not merely an exercise in the history of economic thought. I believe that understanding the differences in Kalecki’s and Keynes’s underlying analysis of the principle of effective demand is essential to comprehending how recent events, such as the East Asian currency crisis and the Russian debt default, affect unemployment in the global economy. In the final pages of this chapter, I shall suggest how Keynes’s analysis points to a solution for today’s recurrent currency crises and high global unemployment rates.

Suggested Citation

  • Paul Davidson, 2007. "There Are Major Differences between Kalecki’s Theory of Employment and Keynes’s General Theory of Employment, Interest, and Money," Palgrave Macmillan Books, in: Interpreting Keynes for the 21st Century, chapter 16, pages 169-189, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28655-9_16
    DOI: 10.1057/9780230286559_16
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    1. Paul Davidson, 1978. "Money and the Real World," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-15865-2, December.
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    1. Lino Sau, 2006. "Non- Stabilizing Flexibility: from the Contributions by Keynes and Kalecki towards a Post-Keynesian Approach," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2006(88), pages 79-92.
    2. Cordelius Ilgmann & Martin Menner, 2011. "Negative nominal interest rates: history and current proposals," International Economics and Economic Policy, Springer, vol. 8(4), pages 383-405, December.
    3. J. E. King, 2012. "Post Keynesians and Others," Review of Political Economy, Taylor & Francis Journals, vol. 24(2), pages 305-319, April.
    4. Claudio Sardoni, 2011. "Unemployment, Recession and Effective Demand," Books, Edward Elgar Publishing, number 13837.
    5. Ilgmann, Cordelius, 2011. "Silvio Gesell: 'a strange, unduly neglected' monetary theorist," CAWM Discussion Papers 23, University of Münster, Münster Center for Economic Policy (MEP).
    6. J E King, 2006. "Imperfectionism in Macroeconomics: New Light on an Old Controversy," Economic Issues Journal Articles, Economic Issues, vol. 11(2), pages 39-50, September.
    7. Robert Dixon, 2007. "Investment, Profits and Employment in Kalecki & Keynes," Department of Economics - Working Papers Series 990, The University of Melbourne.

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