Kalecki on the Determinants of Profits
Michal Kalecki first examined the determinants of profits in a simplified model of a closed economy in which government expenditure and taxation are negligible. Kalecki recognizes that actual investment in a particular period may differ from the investment planned for that period because of mistaken short-term expectations of sales that result in 'unexpected accumulation or running down of stocks'. The explanation for the determination of profits that is reflected in equation is basic to all of Kalecki's writings on macroeconomics; it is from this point that he goes on to infer the levels of wages, output and employment, given this total of profits. Kalecki, in his examination of the determinants of profits, turns from his simplified model to a more general one with international trade, and government taxation and expenditure. Kalecki's explanation of the determination of profits can be used to obtain an overall view of developments in a particular economy.