Kalecki’s Theory of Pricing: Notes on the Margin

Abstract

Kalecki once said to me: In order to be useful a theory has to be simple. A good example of this simplicity is the mark-up. The concept corresponds to a practice which is familiar to business men; it has, therefore, a strong intuitive appeal. Theoretically its function is to enable us to distinguish between those changes in profit which result from the firm’s charging a higher price in relation to cost and those which are merely due to a larger turnover with given capacity — a fortuitous outside circumstance. The first follows from an increase in mark-up, not counting any response of demand (this corresponds to the ‘surplus value produced’ in Marxian terms), and the second from a change in the utilisation of a given capacity (this corresponds to ‘realised surplus value’ in Marx).

Help from comments by Alois Guger and Ewald Walterskirchen is gratefully acknowledged. First published in G. Fink, G. Pöll and M. Riese (eds), Economic Theory, Political Power and Social Justice. Festschrift Kazimierz Laski (Vienna and New York: Springer Verlag, 1987).