Effective demand, capacity utilization and the sectoral distribution of investment

This paper discusses the use of Marx’s schemes of reproduction in the analysis of the problem of effective demand. It is shown that following Marx’s schemes, Kalecki was able to demonstrate that savings are determined by investment and that no financial limits exist to investment, at least in a formal sense. Such a model allows for a comparison between Kalecki’s approach and that of Malinvaud. The paper carries the discussion of the reproduction schemes into the longer period. This is done by using the insights of a two-sector model developed by Kaldor. The paper concludes by stressing that the use made by Kalecki and Joan Robinson of Marx’s model is very fruitful for the analysis of short-run and long-run stability conditions in a monetary capitalist economy.