Mark-up Pricing versus Normal Cost Pricing in Post-Keynesian Models

Abstract

The intent of the present paper is to show that some of Frederic Lee's recent criticisms against some of the hypotheses imbedded in some post-Keynesian models are exaggerated. In contrast to what is argued by Lee, there is no flagrant contradiction between the work of Andrews and his followers and that of most modern-day Kaleckian and post-Keynesian authors. Some of the simplifications used by the latter, such as constant direct unit costs or simple mark-up pricing, were, in fact, suggested by well-known Andrewsian authors, Lee himself included. In addition, although most well-known post-Keynesian authors have relied on the writings of Kalecki to establish their pricing models, Presumably because of its obvious macroeconomic implications, the structure of their model is in many instances drawing on the Andrewsian normal cost pricing Principe.