Profits and Money

After leaving Cambridge, Kalecki took up the challenge of Keynes’s monetary theory. This is perhaps the least understood, and least researched, aspect of Kalecki’s work. In large part this was because much of his monetary theory was not labelled as such, but tended to be tacked on to papers on more general topics. He himself does not seem to have thought sufficiently highly of much of his monetary analysis to revise and republish it in his successive volumes of essays. A good example is his discussion of the money market in his 1933 paper on the business cycle, labelled an ‘application’ of his theory of the business cycle, which he excluded when he republished that paper in 1969 so that it languished unpublished until after Kalecki’s death. There, as in his later work on monetary theory, the theory of profits is at the heart of his analysis: it ensures that money spent in an economy on fixed investment does not disappear from that economy, to be replaced by plant and equipment, but, as with a trade surplus, or a fiscal stimulus, accrues as bank deposits in the accounts of firms or capitalists.