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Jan Toporowski
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Jan Toporowski: University of London

Chapter 8 in Michał Kalecki: An Intellectual Biography, 2013, pp 69-79 from Palgrave Macmillan

Abstract: Abstract In his debut at the Econometric Society in Leyden, Kalecki had been confronted by the view prevailing in economic theory at the time — namely, that prices determine investment and production choices that lead to a general equilibrium in which all resources are applied to useful or desired outcomes. He disposed of this notion in his paper ‘Three Systems’. This paper has not been well understood. The paper is Kalecki’s attempt to think through the flaws in the standard general equilibrium approach to economics. The approach regards the economy as integrated by a system of relative prices abstracted from monetary factors and considers business fluctuations as being due to some kind of natural competition in markets or responses to incorrect prices (including interest rates) brought on by changes in resources, technology or consumer preferences. Needless to say, because of the object of its analysis, this is the most ‘neoclassical’ of Kalecki’s papers, in the sense that in it he appraises the neoclassical idea that prices and wages, rather than business investment, determine production and employment decisions. As a result of this neoclassical focus, a small but significant literature has emerged around the theme that Kalecki’s paper anticipates Hicks’s system of Keynesian general equilibrium, known to generations of economics students as the IS/LM system.1

Keywords: Business Cycle; Central Bank; General Equilibrium; Trade Balance; Mining Company (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pshchp:978-1-137-31539-7_8

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DOI: 10.1057/9781137315397_8

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