Davidson (2000), in making an important comparison of Keynes and Kalecki on employment and effective demand, is unfair in his representation of Kalecki's analysis. Davidson labels Kalecki an "imperfectionist," with unemployment being the result of imperfect competition, and is critical of Kalecki's discussions of financial behavior due to the limited role given to the interest rate. The paper distinguishes between Kalecki's general analysis of effective demand and his analysis specific to capitalist economies. His general analysis of effective demand is applicable to both competitive and imperfectly competitive situations. Unemployment, in the Kaleckian model, is not the result of imperfect competition, but rather results from insufficient effective demand. Imperfect competition can exacerbate the problem. Kalecki's monetary analysis stresses the importance of credit rationing, rather than the rate of interest, as well as assuming demand-determined money supply. It has provided the inspiration for much Post Keynesian analysis. In other words, Kalecki's analysis suggests that a full employment outcome could be automatically maintained by sufficient competition in the product market... Kalecki's theory of effective demand... places the ultimate cause of unemployment on the absence of competition in product markets. (Davidson, 2000, p. 5).
