Full text: Capital Gains in Economic Theory and National Accounting

think of the way in which Keynes dealt with the phenomenon of 
demand inflation ( Kalecki's opinion on the subject was the same). 
The logic of effective demand implies that in an underemployed 
economy additional investment ( or budget expenditure or exports 
or any other additional kind of spending ) will call forth 
additional output and incomes sufficient to create the saving 
necessary to finance the investment. If, however, full or over 
full employment of resources has been reached so that additional 
output can not materialise then further additions to investment 
( or other types of spending ) will exhaust themselves in an 
increase of prices and the excess profits thereby created will 
finance the investment ( or other types of spending ). Thus the 
identity of the amounts of investment and saving will again be 
established but by a different mechanism - increase of prices 
rather than increase in output. In the case of raw materials where 
supply is inflexible at least in the short run the price 
adjustment method is valid even in an otherwise underemployed 
The view of capital gains suggested in this paper is nothing but 
the application of the same ideas to the special case of non- 
reproduceable or limited assets, a case more special in that it 
applies only to assets of a certain type, and yet more general in 
that it holds also in underemployed economies. In both cases the 
shift in distribution is the essential feature. There is nothing 
strange then, after all, in the concept of saving needed to 
finance not only real investment but also the increase in price of 
assets with inflexible supply. 

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