Distribution, Prices and Choice of Technique in Kaleckian Theory

Abstract

A Kaleckian mark-up theory of pricing implies a trade-off frontier between mark-ups and wages, with the result that mark-ups and wages cannot all be independently determined-by whatever processes. Wages in different industries are just as much in conflict as are wages and mark-ups. The way in which relative commodity prices change in response to changes in relative mark-ups may be 'counter-intuitive'. When a choice of technique is allowed for-and it must be-Kaleckian theory is found to give much greater scope for the simultaneous use of alternative production processes in a given industry than does a 'Sraffian' analysis; there are 'switchcurves' rather than mere 'switchpoints'. Techniques which would appear to be dominated (economically irrelevant) in a 'Sraffian' analysis might in fact be utilized in a Kaleckian system. This result re-emerges when foreign trade is considered-and it must be considered in Kaleckian theory. It is found once again that wages and mark-ups cannot be independently determined. The central issue here, however, is just how the patterns of production location and trade are taken to be determined within the Kaleckian markup theory of pricing.