From Keynes' Liquidity Preference to Gesell's Basic Interest

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.