The principle of effective demand, money, credit and finance: Marx, Kalecki, Keynes and the monetary circuit school

Chapter 3 addresses the roots of post-Keynesian macroeconomics in the works of Kalecki and Keynes in more detail, focussing on the principle of effective demand, money, credit and finance. Applying Schumpeter's (1954) distinction between 'monetary analysis' and 'real analysis', not only Kalecki's and Keynes's theories have to be considered as 'monetary analysis', but also Marx's. Furthermore, Kalecki was considerably influenced by Marx's approach to effective demand and capital accumulation. That is the reason why also Marx's views on money, effective demand and capital accumulation are presented in this chapter. Finally, since there has been some confusion, partly also in post-Keynesian economics, about the relationship between endogenous credit, finance, investment and saving, the monetary circuit approach is presented in the last part of Chapter 3, in order to shed some clarifying light on these relationships.