Kalecki’s principle of increasing risk, the distribution of income, and consequences for macroeconomic performance

The significance of Michal Kalecki’s ‘principle of increasing risk’ to illuminating macroeconomic performance is that it relates macroeconomic performance to income distribution by limiting the ability of economic actors to increase income or wealth to a magnitude related to their current income and wealth. Kalecki’s (1937a) article entitled ‘The Principle of Increasing Risk’ was written to answer the question of what determines the limit to the size of the capital investment of a particular entrepreneur in any particular period. As this is a worthwhile query in itself, let’s first look at what Kalecki said about this and then at how it relates to macroeconomic matters.