Binary economics

Binary economics asks two basic questions: “Who or what creates wealth, and, why are there so few capitalists in capitalist societies?”

In investigating these questions, binary economics provides a new way of approaching economic reality. Asking the first question, it is observed that there are two ways of earning a living — working through one’s labour and working through one’s capital assets. In dealing with the second question, binary economics discloses institutional obstacles to universal ownership of income generating capital assets.

Most of the criticism from professional economists arise from the underlying paradigmic difference between mainstream economics and binary economics It is claimed, however, that the paradigm forming the basis of mainstream economics cannot adequately reflect modern economic realities. One of the most important changes in economic reality is the labour/capital ratio as inputs to wealth producing economic processes.

Origins

Like many other heterodox economic theories, binary economics had its origins in the 1930s when capitalism failed to live up to its promises to deliver a continually improving standard of living. Louis Orth Kelso wanted to know why a great, and growing, capacity to produce went hand in hand with millions of people unable to find jobs and earn enough to buy what could be produced? Finding no explanation in existing economic and business literature, Kelso had to do his own analysis. The first result of his findings was a manuscript, The Fallacy of Full Employment written in the early 1940s. A more comprehensive presentation, The Capitalist Manifesto was published in 1958. In essence, Kelso's insight was that Capitalism had not yet come to terms with the long-term effects of the industrial revolution in squeezing the labour content out of production in favour of increasing capital input.

In recent years binary economics has been developed to cover the use of interest-free loans for the development and spreading of all forms of productive capacity. Some examples of these are micro-finance (e.g. poor Bangladeshi women), tidal barrages for clean electricity generation, public capital projects such as bridges, hospitals, roads, and interest-free loans for students. Through its capacity to foster fairness and justice in economic matters while ensuring efficiency through market principles, binary economics is of appeal to all cultures and major faiths.

A new paradigm

The differences between the views of society based on binary economics and those of conventional/orthodox/neoclassical, etc., economics, warrants binary economics to be regarded as an entirely new paradigm of economic thought. The proponents of BE claim that it contains most (if not all) elements that are required by economies if they are to be sustainable. In particular, the paradigm satisfies the the conditions for Say's Law.