Keywords: Steady state; Free money; Zero interest rate; Sufficiency

Abstract: A positive interest rate has many impacts on ecology. One of them is the pushing of economic growth. In the present economy, accumulation of capital is an end in itself. According to the “Golden Rule of Accumulation”, the extension rate of the capital stock is equal to the interest rate. However, in the present economic conditions the interest rate is always significantly higher than zero, due to the liquidity premium of money (Keynes). In this context, old proposals such as the “free money” approach of Silvio Gesell could provide interesting solutions. Gesell wanted to neutralize the liquidity premium by putting “artificial” carrying costs on money. By increasing the stock of capital assets without being interrupted by economic crises, the interest and profitability level should be reduced down to zero. Because in this situation every marginal saving and marginal investment would cause a negative interest or profitability rate, they would be stopped. Though Keynes was very excited by the proposals of Gesell, he criticized the fact that Gesell did not see many of the further obstacles. However, these obstacles could be overcome by means of further institutional reforms.

Ecological Economics, Volume 84, December 2012, Pages 232–239, The Economics of Degrowth