Differential Savings, the Degree of Monopoly and the Level of Income

Abstract

The first part of this chapter is concerned with the savings behaviour postulated by Kalecki, namely that the savings propensity out of labour income is taken to be much smaller than the savings propensity out of profits. The reasons for this view and some of the consequences of it are then explored. When this differential savings proposition is combined with the degree of monopoly approach, a theory on the determination of the level of income and the distribution of income is obtained. We also examine the mechanism envisaged by Kalecki whereby savings adjust to the level of investment. In Kalecki’s approach, investment and savings are brought into equality through changes in the level of income and its distribution, with the rate of interest not involved. In the next chapter, it will be seen that Kalecki regarded the rate of interest as a monetary phenomenon, and not related to savings and investment. The final section of this chapter considers Kalecki’s links with the set of ideas which come under the heading of under-consumptionist approaches.