Effective Demand and Income Distribution in The General Theory
AbstractThe paper looks at income distribution in a short-period context which is similar to that of Keynes’s General Theory. The approach to distribution is different from the one Kaldor adopted in the 1950s: no assumption of full employment is made. The conclusions concerning income distribution which can be inferred from the General Theory depend on Keynes’s assumptions concerning the behavior of prices and the real wage rate with respect to changes in output. In the paper these assumptions are criticized and the implications in terms of distribution are examined. In 1938-1939, Keynes’s conjectures about the relation between output level and the real wage rate were criticized by Dunlop, Tarshis, and, by implication, Kalecki. In his rejoinder, Keynes accepted some of these criticisms and suggested a new approach to income distribution that differs from Kaldor’s and is close to the one adopted by Kalecki and developed by Joan Robinson.