Silvio Gesell: 'a strange, unduly neglected prphet'? A reappraisal of a forgotten pioneer of monetary theory

Cordelius Ilgmann ()

No 200923, Working Papers from Institute of Spatial and Housing Economics, Munster Universitary

Abstract: Given the renewed interest in negative interest rates, this article analyses Gesell’s theory of interest and its connection to J. M. Keynes’ General Theory. Gesell recognised that money has little or no carrying costs in comparison to goods. Therefore, money holders are able to withhold from purchase without costs while producers of goods incur losses due to natural decay. Based on this insight, Gesell defined interest as a purely monetary phenomenon. Even if the explanation of interest as being a monetary phenomenon caused by the comparatively small carrying cost of money is clearly overly simplistic, Keynes himself expressively acknowledged Gesell’s ‘flashes of deep insight’ in the General Theory. In fact, the theoretical similarities between Keynes and Gesell as well as Keynes’ extensive references to Gesell underline the Post Keynesian claim that Keynes’ departure from classical economics went beyond the ‘bastard’ textbook Keynesianism.

Keywords: History of Economic Thought; Theory of Interest; Negative Interest Rates; John Maynard Keynes; Silvio Gesell (search for similar items in EconPapers)
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