The London School of Economics and Political Science 
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Department of Economics 
Professor Josef Steindl 
Schwarzhorng 10/17 
A-1050 Wien 
Austria 
13th March 1987 
Dear Professor Steindl, 
[ appreciated very much your recent comments on my joint paper on Kalecki's 
theory of growth under capitalism. Your welcome complements apart, you 
appear to be puzzled by my treatment of "rash capitalism. Let me explain 
that, similarly as Kalecki, I also attempt to establish the existence 
of a balanced growth path. In the case when h < h, there exists such 
a path and the analysis is very much the same as that of Kalecki in his 
E.J. (1962) paper. However, there is nothing in Kalecki's theory to rule 
out the case in which h > h. In this case the trend cannot be established 
in the usual way as a stable balanced growth (BG) solution. The Kaleckian 
theory of the cycle is still there. The problem is that cyclical fluctuations 
are, in this case, explosive. But we know that the movements in investment 
and output must be contained by the ceiling and the floor. Kalecki himself 
recognised this possibility in his Theory of Economic Dynamics. He pointed 
this out to me, when we discussed his E.J.(1962) paper and an earlier 
version of his E.J. (1968) paper, back in 1966-7. This was in response 
to my analysis thathis implicit assumption that the lower BG rate is always 
stable may, in fact, be wrong. He took the point seriously and did recognise 
without any ado that,in this case ythe trend cannot be established without 
the reference to the floor and the ceiling. Later, I felt, that it was 
in part that series of discussions which led him, in his E.J. (1968) paper, 
effectively to abandon the attempt to endogenise the trend and, instead, 
to explain it in terms of long term changes which in his model are exogenously 
given. 
The trend under rash capitalism is established endogenously to the extent 
to which the floor and the ceiling levels of investment depend on the 
capital stock, which itself is determined by the trend level of investment 
in the past. 
[ look forward to receiving your further comments. With my best wishes, 
yours sincerely, 
AD WIN Go oo Sa 
Stanislaw Gomulka 
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