Abstract
Kalecki scored a breakthrough by introducing the ‘degree of monopoly’ into his macrodynamic model. He offered a theory of distribution that was independent of the neo-classical tradition. He introduced a promising alternative theory of distribution, even if it lacked a comprehensively formulated theory of market behaviour and was in some respects deficient in dealing with the question of investment decisions. To build a realistic theory of distribution, Kalecki offered an explanation of how prices in fact are formed by mark-ups on prime costs. This use of mark-ups to cover overheads is very important. Though it entails monopoly power it is not synonymous with it.
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