KEYNES, KALECKI AND THE GENERAL THEORY
In line with these comments by Joan Robinson, it is fairly well established that Keynes and Kalecki independently discovered the principle of effective demand. These two intellectual giants should have towered over twentieth-century economics. Their discovery showed, contrary to all previous economic thought with the possible exception of Marx1 and ‘the brave army of heretical…under-consumption[ists]’,2 that the economy would not necessarily generate full employment of all resources, especially not of labour. The reason for this was not some market ‘imperfection’, such as rigidity of prices or wages, but, rather, insufficient effective demand. In other words, fundamental to their respective visions of capitalist economies was the insight that there was no market mechanism that could guarantee full employment. Unemployment, far from being the result of a malfunction in the market mechanism, resulted from the way that markets worked. To achieve full employment, some exogenous injection of demand was required. Instead of the accolade due to them the contributions of Kalecki were largely ignored, especially in the mainstream, while those of Keynes were sanitized and introduced into the orthodoxy in a bastardized version with the emphasis on market imperfections3. Eventually even this version of Keynesianism was abandoned. Despite the similarity of their conclusions as to the inability of market economies to generate full employment, Keynes and Kalecki emerged from entirely different backgrounds and from very different intellectual traditions.4 Given the differences between the two, it is not suprising that there are important differences in their derivation of the analysis of effective demand.