PROFIT-RATE EQUALIZATION IN THE KALECKI^STEINDL MODEL AND THE ``OVER- DETERMINATION'' PROBLEM* by AMITAVA KRISHNA DUTT{ University of Notre Dame This note points out that the ``over-determination'' problem dis- covered by Park in Kalecki^Steindl (KS) models is not a problem intrinsic to KS models and can easily be removed if one introduces a mechanism involving classical competition into them. The solution to the problem suggested by Park using a moving-average interpretation is therefore unnecessary, and also it does not provide an adequate solution to the ``over-determination'' problem. However, the inter- pretation does serve to clarify the meaning of long-run equilibria in KS models. I Introduction In a recent paper, Park (1995) argues that the introduction of the assumption of intersectoral pro¢t-rate equalization in a steady-state Kalecki^Steindl (henceforth KS) model with independent investment functions and mark-up pricing equations leads to an over-determined model in the sense that it has more independent equations than variables. To argue this, Park modi¢es a simple two-sector KS model I developed earlier (see Dutt, 1990) to discuss the precise nature of the over- determinacy problem. He then tries to rescue the KS approach by replacing its steady-state or long-run-equilibrium interpretation with one based on steady ``moving-average'' rates of accumulation. He claims that this interpretation not only overcomes the over-determinacy problem but also solves some other problems which plague the KS model, including the problem of the existence of undesired excess capacity at long-run equilibrium. In this note I argue that, properly interpreted, the two-sector and multi-sector KS models do not su¡er from the problem of over- determination discussed by Park. Moreover, I argue that Park's ``moving- average'' interpretation is formally no di¡erent from the steady-state or long-run-equilibrium interpretation. Thus, his suggested solution is an incorrect solution to a problem that does not exist. Nevertheless, Park's ß Blackwell Publishers Ltd and The Victoria University of Manchester, 1997. Published by Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK, and 350 Main Street, Malden, MA 02148, USA. 443 The Manchester School Vol LXV No. 4 September 1997 0025^2034 443^451 * Manuscript received 28.11.95; ¢nal version received 22.11.96. { I am grateful to Marc Lavoie, M.-S. Park and an anonymous referee for useful suggestions.