Two Versions of the Principle of Effective Demand: Kalecki and Keynes

In this paper the differences between the principle of effective demand of Keynes and Kalecki are analyzed, focusing on Kalecki's less well known version. The paper considers, in the first place, the theory of prices and the theory of distribution. Then it deals with the theory of investment, and finally it studies money and finance in the principle of effective demand. The author concludes that it would be difficult to disregard the importance of Kalecki's theory of the profit share based on the pricing policy of firms, and of the profit level based on capitalist expenditure. A host of empirical research showing that investment is determined by past profits and is conditionally stable has also, in the authors' opinion, vindicated Kalecki's theory of investment. But, on the other hand, the study of the financial aspects of capitalism is an area where Kalecki's theory needs to be completed and updated.