7 - The origin of the doctrine of mark up prices: Michal Kalecki's microanalysis

Summary

The origins of the mark up prices doctrine is found in a bundle of ideas and theoretical arguments that Michal Kalecki put together between 1929 and 1945 to provide a foundation for his macroeconomic work on the business cycle and income distribution. The development of this foundation came in two stages – the Polish stage in which Kalecki developed a broad non-marginalist disaggregated framework and the English stage in which he inserted into the center of the framework a marginalist pricing theory. Kalecki set out his disaggregated framework with its marginalist pricing core, or his microanalysis, in articles and books, only some of which were available to the non-Polish reading economists in England; thus personal communication with his colleagues at Cambridge and Oxford was an important route through which his ideas and arguments became known. Whether through the written word or conversations over coffee, Kalecki's microanalysis became recognized as the original core of the mark up prices doctrine. Although he did not present his microanalysis in a schematic manner, it is possible to create one by starting with Kalecki's characterization of a capitalist economy and society, of industry, and of the business enterprise, then delineating his pricing theory and his analysis of the investment decision, and ending by indicating how Kalecki used his microanalysis to examine income distribution, aggregate economic activity, aggregate employment, and, in the end, cyclical growth.