Rate of Profit and Income Distribution in relation to the Rate of Economic Growth

The Author explains that one of the most exciting results of the macro-economic theories which had been elaborated in Cambridge (in the Fifties) was a very simple relation connecting rate of profit and distribution of income to the rate of economic growth, through the interaction of the different propensities to save. The interesting aspect of this relation is that, using the Keynesian concepts of income determination gives by effective demand and of investment as a variable independent of consumption and savings, approval gives a neat and modern content to the deep-rooted old Classical idea of a certain connection between distribution of income and capital accumulation. It represented a break with the hundred-year-old tradition of marginal theory, and it is no wonder that it immediately became the target of attacks. Its approval or rejection have almost invariably coincided with the commentators' marginalistic or non-marginalistic view. The purpose of the paper is to present a more logical reconsideration of the whole theoretical framework, regarded as a system of necessary relations to achieve full employment. A proof is given showing that the model, as originally formulated by Kaldor, cannot be maintained. However, once the necessary modifications are introduced, the conclusions which emerge appear much more general and more interesting than at first perceived.