Michał Kalecki
Michał Kalecki (Polish pronunciation: [ˈmixaw kaˈlɛt͡skʲi]; 22 June 1899 – 18 April 1970) was a Polish Marxian economist. Over the course of his life, Kalecki worked at the London School of Economics, University of Cambridge, University of Oxford and Warsaw School of Economics and was an economic advisor to the governments of Poland, France, Cuba, Israel, Mexico and India. He also served as the deputy director of the United Nations Economic Department in New York City.
Michał Kalecki
22 June 1899
18 April 1970 (aged 70)
Business cycle theory, monetary theory, profit equation, theories of mark-up and effective demand
Kalecki has been called "one of the most distinguished economists of the 20th century" and "likely the most original one". It is often claimed that he developed many of the same ideas as John Maynard Keynes before Keynes, but he remains much less known to the English-speaking world. He offered a synthesis that integrated Marxist class analysis and the new literature on oligopoly theory, and his work had a significant influence on both the neo-Marxian (Monopoly Capital)[2] and post-Keynesian schools of economic thought. He was one of the first macroeconomists to apply mathematical models and statistical data to economic questions. Being also a political economist and a person of leftist convictions, Kalecki emphasized the social aspects and consequences of economic policies.[3]
Kalecki made major theoretical and practical contributions in the areas of the business cycle, growth, full employment, income distribution, the political boom cycle, the oligopolistic economy, and risk. Among his other significant interests were monetary issues, economic development, finance, interest, and inflation. In 1970, Kalecki was nominated for the Nobel Memorial Prize in Economics, but he died the same year.[4]
Biography[edit]
Early years: 1899–1933[edit]
Michał Kalecki was born on 22 June 1899 in Łódź, Congress Poland, then part of the Russian Empire. Information about his early years is very sparse, part of it being lost during the Nazi occupation, but he grew up in a major labor-turbulent industrial center, which affected his future views.[3] In 1917 Kalecki enrolled at the Warsaw Polytechnic to study civil engineering.[5] He was a very able student and formalized a generalization of Pascal's theorem, concerning a hexagon drawn within a second-degree curve: Kalecki generalized it for a polygon of 2n sides.
Because his father lost a small textile workshop, Kalecki was forced to work as an accountant. During his first year in Warsaw he continued working sporadically and precariously. After finishing his first year of engineering studies, he had to interrupt his studies from 1918 to 1921 to complete military service. Upon leaving the military he joined Gdańsk Polytechnic, where he stayed until 1923, but because of the family financial situation had to leave the institution just before graduating.[5]
Contributions to economics[edit]
Background and overview[edit]
Despite the fact that Kalecki authored many theoretical economic constructs, his interest in economics was more practical than academic and resulted from his work in engineering, journalism, credit investigation, use of statistics and observation of business operations. Full-time university teaching, for which he did not have formal qualifications (a degree), he did only during the last thirteen years of his career. He was contemptuous of abstract research and declined Keynes's invitation to undertake a critique of Jan Tinbergen's econometric business cycle work, for which he would also lack an in-depth knowledge of statistical theory.[3]
Kalecki stressed that the predominant economic growth models were built on the assumption of an idealized laissez-faire capitalism and did not properly take into account the crucial and empirically demonstrable role of the government sector, the state's intervention and the interaction between the state and private sectors.[16]
In 1943 Kalecki wrote: '... "discipline in the factories" and "political stability" are more appreciated by the business leaders than are profits. Their class instinct tells them that lasting full employment is unsound from their point of view and that unemployment is an integral part of the normal capitalist system.' The capitalists therefore want to limit government intervention and spending as disruptions to laissez-faire that reduce their "state of confidence" in the overall economic performance, with the notable exception of armament spending and policies that lead to increased armament spending (the last point Kalecki emphasized again in 1967).[17][18]
The economics of Kalecki was based, more explicitly and systematically than that of Keynes, on the principle of the circular flow of income that goes back to the Physiocrat François Quesnay. According to that principle, income is determined by expenditure decisions, not by the exchange of resources (capital or labor). Kalecki and Keynes claimed that in capitalist economy, production and employment levels (economic equilibrium) are determined foremost by the magnitude of investment by business enterprises (the crucial "driver of the business cycle"), not by price and wage flexibility. Savings are determined by investments, not the other way around. Contrary to the Ricardian and Neoclassical economics, Kalecki asserted that higher wages lead to fuller employment. His monetary theory was rooted in the business cycle theory of Knut Wicksell. Quesnay's circular flow of income fell into disrepute in the political economy of the 19th century, when the idea that prices integrate exchange decisions gained ground, but was revived by Joseph Schumpeter, who pointed out the necessity of considering the circular flow of income (recognition of the economic cycle) as an integrating factor in order to gain a comprehensive understanding of the total economic process in a given period. The principle was discarded again with the arrival of neoliberal domination in economics and its main current defined by prices of economic equilibrium.[b] Economist Jan Toporowski said that Kalecki's theory of the business cycle remains "the most serious challenge to general equilibrium macroeconomics", which has prevailed since the late 19th century. More than Keynes, Kalecki was skeptical about government's ability to sustain fiscal and monetary stimulus policies or of business support for full employment.[3][19][20]
Like Keynes, Kalecki was concerned with demand management. Kalecki distinguished three ways of stimulating demand: through the government improving conditions for private investment (a time-consuming and burdensome for the populace process of which he was skeptical), through redistribution of income from profits to wages, and through public investment that increases employment and demand automatically.[21]
Kalecki was engaged in the problems of developing countries. He argued that their industrialization depended on land reform and taxation of land owners and the middle classes. He was skeptical about a positive role of foreign direct investment in stimulating economic modernization. Polish economist Oskar Lange, who worked with Kalecki also on centrally planned socialist economies of the Soviet Bloc, characterized him as a "leftist Keynesian".[3][20]
According to Toporowski, Kalecki's monetary theory is of particular significance. Unlike Keynes, Kalecki regarded credit as a fundamental system of financial reckoning in capitalist economy, not just as clearing of payments between commercial banks and a central bank. He saw monetary policy as endogenous to the business cycle, dependent on business investment rather than on interest rate and credit policy of central bankers. Unlike Keynes, who followed the partial equilibrium approach, for Kalecki economic dynamics was synonymous with the business cycle, where "the circular flow of income generates cumulative changes from one period to the next". Kalecki and Lange stressed the necessity of analysis of actually-functioning capitalism in both the advanced and developing countries, before economic theories could be built or courses of action prescribed.[3][19][20] Kalecki's studies of capitalist enterprises included their finances, investment patterns and factors that influence investment, such as the development of financial markets, microeconomic conditions, and governmental fiscal interventions.[22]
Profit equation[edit]
The volume of economic literature written by Kalecki during his life was very large. Although in most of his articles he returned to the same subjects (business cycles, determinants of investment, socialist planning), he often did it from a slightly unusual perspective and with original contributions.
Kalecki's most famous contribution is his profit equation. Kalecki, whose early influences came from Marxian economists,[23] thought that the volume of profits and their sharing in a capitalist society were vital points to be treated. This followed from Karl Marx's work on relationships such as the rate of surplus value or the organic composition of capital (and even a forecast about the overall trend of profits). However, Marx was not able to make a meaningful statement about the total volume of profits in a given period.
Kalecki derived this relationship in an extremely concise, elegant and intuitive way. He starts by making simplifications which he later progressively eliminates. These assumptions are:
Influence[edit]
In the first half of the 1990s, Oxford University Press published 7 volumes of Collected Works of Michal Kalecki, referring to him as "one of the most distinguished economists of the 20th century." Many of his works were translated into English for the first time in this collection.
Kalecki's work has inspired the Cambridge (UK) post-Keynesians, especially Joan Robinson, Nicholas Kaldor and Richard M. Goodwin, as well as the modern American post-Keynesian economists.[28]