Rethinking Kalecki on the Trend and Cycle

Graham White

Review of Political Economy, 1999, vol. 11, issue 3, 341-353

Abstract: This paper examines Kalecki's explanation of investment in his 1968 paper 'Trend and business cycles reconsidered' and his idea on the relationship between the long-run trend and the business cycle. An important aspect of that explanation is a comparison between actual and the so-called 'standard' rate of profit. However, when the influence of the cycle on entrepreneurs' views of normal capacity utilization is allowed for, the role of divergences between actual and standard profit rates in the investment process becomes less clear. Exogenous influences on fixed capital investment, particularly innovation, may then become more important, especially in triggering those movements in investment that are at the centre of Kalecki's explanation of the cycle. This suggests a much closer link, via innovation, between the cycle and the long-run trend.

Date: 1999
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DOI: 10.1080/095382599107066

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