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A FRAMEWORK FOR MACRO‐DISTRIBUTION ANALYSIS 1
Author(s) -
Riach P. A.
Publication year - 1969
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.1969.tb00919.x
Subject(s) - economics , income distribution , investment function , investment (military) , microeconomics , post keynesian economics , aggregate demand , macro , distribution (mathematics) , marginal utility , marginal propensity to consume , econometrics , labour economics , macroeconomics , monetary policy , mathematical analysis , programming language , mathematics , production (economics) , politics , political science , computer science , law , inequality , market liquidity
SUMMARY The behavioural interpretation which K aldor places on his famous identity between the investment‐income ratio and the profit share, and which he attempts to justify by the erroneous claim that the investment‐income ratio is an independent variable in the Keynesian system, rests crucially on a model of the firm's pricing behaviour. If an alternative pattern of pricing behaviour is postulated the direction of causation is reversed with the aggregate savings propensity, and hence aggregate demand, being dependent upon the distribution of income, and subsequently to K aldor C artter published a model in which both savings and investment are dependent upon the distribution of income. Both models centre upon the aggregate demand—income distribution relationship, but C artter fails to incorporate any analysis of factor share determination and he does not show how a determinate level of income is achieved, whilst K aldor's mechanism can only function in a full employment situation. In this paper the influences of marginal productivity and K alecki's ‘degree of monopoly’ are combined with Kaldor/Cartter‐type propensities relating savings and investment to the distribution of income, thereby producing a model in which the level of income and the distribution of income are interdependent and involve the determination of a position of simultaneous equilibrium. It is argued that, by retaining the influence of marginal productivity and not being reliant on a full employment situation, the model is in fact more ‘Keynesian’ than K aldor's so‐called ‘Keynesian’ model.