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Silvio Gesell: 'a strange, unduly neglected' monetary theorist

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  • Ilgmann, Cordelius

Abstract

Given the renewed interest in negative interest rates as method for removing the floor to nominal interest rates, this article offers a concise review of Gesell's life, work and its place in the history of economic thought. It provides a brief biographical sketch of Gesell, demonstrating both his relative prominence as a social reformer during the interwar years as well as his close affiliation with anarchism. The article then gives a concise summary of Gesell's theory of effective demand and interest as expounded in the Natural Economic Order, the former being neglected by most scholars working on the subject. Finally, it is demonstrated that Keynes endorsement of Gesell as a strange, unduly neglected prophet is another piece of evidence for rejecting Hick's classic interpretation of the General Theory. If one takes Keynes extensive discussion of Gesell's theory of interest as a key for understanding the General Theory, Keynes main innovation of General Theory becomes a monetary theory of interest based on uncertainty that results in liquidity preference. The limited literature on Keynes' link to Gesell, published mainly in the 1940s, has however been widely ignored in the debate about the General Theory.

Suggested Citation

  • Ilgmann, Cordelius, 2011. "Silvio Gesell: 'a strange, unduly neglected' monetary theorist," CAWM Discussion Papers 23, University of Münster, Center of Applied Economic Research Münster (CAWM).
  • Handle: RePEc:zbw:cawmdp:23
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    References listed on IDEAS

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    1. Buiter, Willem H., 2009. "Negative nominal interest rates: Three ways to overcome the zero lower bound," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 213-238, December.
    2. Buiter, Willem H. & Panigirtzoglou, Nikolaos, 1999. "Liquidity Traps: How to Avoid Them and How to Escape Them," CEPR Discussion Papers 2203, C.E.P.R. Discussion Papers.
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    Keywords

    History of Economic Thought; Theory of Interest; Negative Interest Rates; John Maynard Keynes; Silvio Gesell;

    JEL classification:

    • B19 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Other
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other

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