KALECKI'S ECONOMICS OF SOCIALISM.

The article examines the views of economist Michal Kalecki on the economics of socialism. Kalecki asserts that full employment in a socialist system is maintained through the reduction of prices in relation to costs, whereas in the capitalist system, the price-cost relationship is maintained and profits fall by the same amount as investment plus capitalists' consumption through the reduction in output and employment. The two social systems differ in the way they react to a fall in the propensity to invest. The author simplified the principle by stating that one reacts by adjusting output and employment to a given pattern of income distribution between wages and profits, and the other by adjusting income distribution to the capacity level of output and employment.