A-11o3 Wien, Postfach 9"!
9th October 1975•
Dear Osiatynski,
Thank you f->r your letter.
1. The coefficient m h^s definitely the dimension of time, just as
the lag 0 } this is because it accurs as the coefficient of
a "velocity" sthe change of investment per unit of time,
which must be multiplied by a time dimension in order to yi&ld
A 1 A-
^a contribution to^the rate of investment. ~ ~Z^T~
The economic me a ning of the inequality^.is simply
that the response to the change in investment ( or to profits
must not be too strong in relation to the lag £) , or else
there will be very large growth rates. The condition, I think,
is not implausible, because a somewhat related condition is
necessary in the business cycle theory to ensure that the cycle is
damped.
My reason for excluding oase II and case III is precisely
that they would produce unrealistically large growth rates.
In this context i& must be noted that Kalecki^s model of the trend
treats mainly the problem of effective demand. The restrictions
which in reali^ty are placed on growth by the condition s of
supply are not discussed in any detail; they enter the mathematical
formulation only via the lag 9 , which limits the speed of
accumulation. You may remember a paper of fc. dealing with
limitation of the speed of accumulation in Poland especially in the
coal mines: he showed that owing to lack of skilled manpower
the attempt to increase the investment mayx beyond a certain
level may simply lead to an increase in the period required to
execute investment projects, in other words, the lag 6
Thus ¥ ou may say that if the investment response m would increase
too much, the lag ^for the reasons indicated, would increase even
farther ^ - because of restrictions on the supply side, in the
last resort^ because the speed at which people can learn is limited.
2. The 1968 paper is not materially different from the earlier
trend theory but rather in the mathematical approach; all or most of
the trend generating forces appear now in form of a function of time,
i.e. o n the face of it they are treated as exogenous. The verbal
explanations^, however, make it quite clearfthat Kalecki continued