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From Keynes' Liquidity Preference to Gesell's Basic Interest


  • Ahmed Anwar


In his General Theory of Employment, Interest and Money, John Maynard Keynes devotes a section in chapter 23 on the theories of Silvio Gesell, best known for the proposal to use stamped money. Although the account is generally favourable, Keynes finds key defects in Gesell’s proposed monetary reforms. We look carefully at this section together with Keynes’ own theory of liquidity preference which Keynes considers a completion of Gesell’s imperfect insights. We will argue that Keynes was in fact mistaken on these defects and that although both Keynes and Gesell identify the same theoretical problem, a special role that money plays in preventing the optimal accumulation of capital, it is only Gesell’s reform that in theory provides a solution.

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  • Ahmed Anwar, 2020. "From Keynes' Liquidity Preference to Gesell's Basic Interest," Edinburgh School of Economics Discussion Paper Series 299, Edinburgh School of Economics, University of Edinburgh.
  • Handle: RePEc:edn:esedps:299

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    1. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(2), pages 209-223.
    2. Dillard, Dudley, 1946. "The Pragmatic Basis of Keynes's Political Economy," The Journal of Economic History, Cambridge University Press, vol. 6(2), pages 121-152, November.
    3. Cordelius Ilgmann & Martin Menner, 2011. "Negative nominal interest rates: history and current proposals," International Economics and Economic Policy, Springer, vol. 8(4), pages 383-405, December.
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