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central bank-issued interest-free loans subsection</span> </button> <ul id="toc-Uses_of_central_bank-issued_interest-free_loans-sublist" class="vector-toc-list"> <li id="toc-Investments_eligible_for_interest-free_loans" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Investments_eligible_for_interest-free_loans"> <div class="vector-toc-text"> <span class="vector-toc-numb">6.1</span> <span>Investments eligible for interest-free loans</span> </div> </a> <ul id="toc-Investments_eligible_for_interest-free_loans-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-References" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#References"> <div class="vector-toc-text"> <span class="vector-toc-numb">7</span> <span>References</span> </div> </a> <ul id="toc-References-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Sources" class="vector-toc-list-item vector-toc-level-1 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Statements consisting only of original research should be removed.</span> <span class="date-container"><i>(<span class="date">January 2011</span>)</i></span><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1251242444"><table class="box-Synthesis plainlinks metadata ambox ambox-content" role="presentation"><tbody><tr><td class="mbox-image"><div class="mbox-image-div"><span typeof="mw:File"><span><img alt="" src="//upload.wikimedia.org/wikipedia/commons/thumb/1/1b/Ambox_question.svg/40px-Ambox_question.svg.png" decoding="async" width="40" height="40" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/1/1b/Ambox_question.svg/60px-Ambox_question.svg.png 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/1/1b/Ambox_question.svg/80px-Ambox_question.svg.png 2x" data-file-width="40" data-file-height="40" /></span></span></div></td><td class="mbox-text"><div class="mbox-text-span">This article or section <b>possibly contains <a href="/wiki/Wikipedia:No_original_research#Synthesis_of_published_material" title="Wikipedia:No original research">synthesis of material</a> which does not <a href="/wiki/Wikipedia:Verifiability" title="Wikipedia:Verifiability">verifiably mention</a> or <a href="/wiki/Wikipedia:Content_removal#Irrelevant_information" title="Wikipedia:Content removal">relate</a> to the main topic.</b><span class="hide-when-compact"> Relevant discussion may be found on the <a href="/wiki/Talk:Binary_economics##" title="Talk:Binary economics">talk page</a>.</span> <span class="date-container"><i>(<span class="date">January 2011</span>)</i></span><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> </div> </div><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> <div class="shortdescription nomobile noexcerpt noprint searchaux" style="display:none">Theory of economics</div> <p><b>Binary economics</b>, also known as two-factor economics, is a theory of <a href="/wiki/Economics" title="Economics">economics</a> that endorses both <a href="/wiki/Private_property" title="Private property">private property</a> and a <a href="/wiki/Free_market" title="Free market">free market</a> but proposes significant reforms to the <a href="/wiki/Bank" title="Bank">banking system</a>.<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p><a href="/wiki/Louis_Kelso" class="mw-redirect" title="Louis Kelso">Louis Kelso</a> theorized that widespread use of <a href="/wiki/Central_bank" title="Central bank">central bank</a>-issued, interest-free loans to fund <a href="/wiki/Employee_stock_ownership_plan" class="mw-redirect" title="Employee stock ownership plan">employee-owned firms</a> could simultaneously finance economic growth and widen <a href="/wiki/Stock" title="Stock">stock</a> ownership in a way which binary economists believe would be non-inflationary.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (March 2015)">citation needed</span></a></i>]</sup> </p><p>The term "binary" derived from its <a href="/wiki/Heterodox_economics" title="Heterodox economics">heterodox</a> treatment of labor and capital (but not in the sense of <a href="/wiki/Binary_opposition" title="Binary opposition">binary opposition</a>).<sup id="cite_ref-Rodney_Shakespeare_2007_2-0" class="reference"><a href="#cite_note-Rodney_Shakespeare_2007-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> Kelso claimed that in a truly free market wages would tend to fall over time, with all the benefits of technological progress accruing to capital owners.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (March 2015)">citation needed</span></a></i>]</sup> </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Overview">Overview</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=1" title="Edit section: Overview"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Binary economics rejects the claim that <a href="/wiki/Neoclassical_economics" title="Neoclassical economics">neoclassical economics</a> alone promotes a '<a href="/wiki/Free_market" title="Free market">free market</a>' which is free, fair and efficient. (e.g., as an interpretation of the classical <a href="/wiki/First_Fundamental_Theorem_of_Welfare_Economics" class="mw-redirect" title="First Fundamental Theorem of Welfare Economics">First Fundamental Theorem of Welfare Economics</a>). Binary economists believe freedom is only truly achieved if all individuals are able to acquire an independent economic base from capital holdings, and that the distribution of ownership rights can "deepen democracy".<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> </p><p>Binary economics argues that financial savings prior to an investment is not required on the basis that the present money supply is mostly created credit anyway.<sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> It argues that newly minted money invested on behalf of those <i>without access</i> to existing cash savings or <a href="/wiki/Collateral_(finance)" title="Collateral (finance)">collateral</a> can be adequately repaid through the returns on those investments, which need not be inflationary if the economy is operating below capacity. The theory asserts that what matters is whether the newly created money is interest-free, whether it can be repaid, whether there is effective collateral and whether it goes towards the development and spreading of various forms of productive (and the associated consuming) capacity.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (March 2015)">citation needed</span></a></i>]</sup> </p><p>Another contrast is that, in evidence-based economics, <a href="/wiki/Interest" title="Interest">interest</a> (distinct from administration cost) is <i>always</i> necessary; in Binary Economics theory it <b>isn't</b> (not in relation to the development and spreading of productive capacity).<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> Conventional economics accounts for the observed <a href="/wiki/Time_value_of_money" title="Time value of money">time value of money</a>, whereas binary economics does not.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (March 2015)">citation needed</span></a></i>]</sup> </p> <div class="mw-heading mw-heading2"><h2 id="Background">Background</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=2" title="Edit section: Background"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The theory behind Binary Economics was proposed by American lawyer <a href="/wiki/Louis_Kelso" class="mw-redirect" title="Louis Kelso">Louis Kelso</a> and philosopher <a href="/wiki/Mortimer_J._Adler" title="Mortimer J. Adler">Mortimer Adler</a> in their book <i>The Capitalist Manifesto</i> (1958). The title of the book can be interpreted as a <a href="/wiki/Cold_War" title="Cold War">Cold War</a> reference in opposition to <a href="/wiki/Communism" title="Communism">communism</a>.<sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> </p><p>Kelso and Adler elaborated on their proposals in <i>The New Capitalists</i> in 1961. Then Kelso worked with political scientist Patricia Hetter Kelso to further explain how capital instruments provide an increasing percentage of the wealth and why capital is narrowly owned in the modern industrial economy.<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> Their analysis predicted that widely distributed capital ownership will create a more balanced economy. Kelso and Hetter proposed new "binary" shareholdings which would pay out full net earnings as dividends (with exceptions for research, maintenance and <a href="/wiki/Depreciation" title="Depreciation">depreciation</a>). These could be obtained on credit by those not possessing savings, with a government-backed insurance scheme to protect the shareholder in the event of loss.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (March 2015)">citation needed</span></a></i>]</sup> </p><p>Kelso's writings had negative reception by academic economists. <a href="/wiki/Milton_Friedman" title="Milton Friedman">Milton Friedman</a> said of <i>The Capitalist Manifesto</i> "the book's economics was bad ... the interpretation of history, ludicrous; and the policy recommended, dangerous" and recalls a debate where the moderator <a href="/wiki/Clark_Kerr" title="Clark Kerr">Clark Kerr</a> "lost his cool as a moderator and attacked [Kelso's arguments] vigorously".<sup id="cite_ref-8" class="reference"><a href="#cite_note-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> <a href="/wiki/Paul_Samuelson" title="Paul Samuelson">Paul Samuelson</a>, another <a href="/wiki/Nobel_Memorial_Prize_in_Economic_Sciences" title="Nobel Memorial Prize in Economic Sciences">Nobel Memorial Prize in Economic Sciences</a> winner, told the <a href="/wiki/U.S._Congress" class="mw-redirect" title="U.S. Congress">U.S. Congress</a> that Kelso's theories were a "cranky fad" not accepted by mainstream economists, but Kelso's ideas on promoting wider capital ownership nevertheless significantly influenced the passing of legislation promoting employee ownership.<sup id="cite_ref-Samuelson_9-0" class="reference"><a href="#cite_note-Samuelson-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="Aims_and_programme">Aims and programme</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=3" title="Edit section: Aims and programme"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The aim of binary economics is to ensure that all individuals receive income from their own independent capital estate,<sup id="cite_ref-10" class="reference"><a href="#cite_note-10"><span class="cite-bracket">[</span>10<span class="cite-bracket">]</span></a></sup> using interest-free loans issued by a <a href="/wiki/Central_bank" title="Central bank">central bank</a> to promote the spread of <a href="/wiki/Employee_stock_ownership_plan" class="mw-redirect" title="Employee stock ownership plan">employee-owned firms</a>.<sup id="cite_ref-Rodney_Shakespeare_2007_2-1" class="reference"><a href="#cite_note-Rodney_Shakespeare_2007-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> These loans are intended to: halve <a href="/wiki/Infrastructure" title="Infrastructure">infrastructure</a> improvement costs, reduce business startup costs, and widen <a href="/wiki/Stock" title="Stock">stock</a> ownership. </p><p>Binary economics is not mainstream and does not fit easy into the <a href="/wiki/Left%E2%80%93right_spectrum" class="mw-redirect" title="Left–right spectrum">left–right spectrum</a>.<sup id="cite_ref-11" class="reference"><a href="#cite_note-11"><span class="cite-bracket">[</span>11<span class="cite-bracket">]</span></a></sup> It has variously been characterized as an extreme right-wing ideology and as extremely left-wing by its critics.<sup id="cite_ref-12" class="reference"><a href="#cite_note-12"><span class="cite-bracket">[</span>12<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-13" class="reference"><a href="#cite_note-13"><span class="cite-bracket">[</span>13<span class="cite-bracket">]</span></a></sup> The '<a href="https://en.wiktionary.org/wiki/binary" class="extiw" title="wikt:binary">binary</a>' (in 'binary economics') means 'composed of two' because it suffices to view the physical <a href="/wiki/Factors_of_production" title="Factors of production">factors of production</a> as being but two (<a href="/wiki/Labour_(economics)" class="mw-redirect" title="Labour (economics)">labour</a> and <a href="/wiki/Capital_(economics)" title="Capital (economics)">capital</a> (which includes <a href="/wiki/Land_(economics)" title="Land (economics)">land</a>). It recognises only two ways of genuinely earning a living − by labour and by productive capital ownership. In its theory humans own their labour, but also productive capital.<sup id="cite_ref-14" class="reference"><a href="#cite_note-14"><span class="cite-bracket">[</span>14<span class="cite-bracket">]</span></a></sup> </p><p>Binary economics is partly based on belief that society has an absolute duty to ensure that all humans have good health, housing, education and an independent income, as well as a responsibility to protect the environment for its own sake. The interest-free loans proposed by binary economics are compatible with the traditional opposition of the <a href="/wiki/Abrahamic_religions" title="Abrahamic religions">Abrahamic religions</a> to <a href="/wiki/Usury" title="Usury">usury</a>.<sup id="cite_ref-Rodney_Shakespeare_2002_15-0" class="reference"><a href="#cite_note-Rodney_Shakespeare_2002-15"><span class="cite-bracket">[</span>15<span class="cite-bracket">]</span></a></sup> </p><p>Proponents<sup id="cite_ref-16" class="reference"><a href="#cite_note-16"><span class="cite-bracket">[</span>16<span class="cite-bracket">]</span></a></sup> of binary economics claim that their system contains no <a href="/wiki/Expropriation" class="mw-redirect" title="Expropriation">expropriation</a> of wealth, and much less <a href="/wiki/Redistribution_(economics)" class="mw-redirect" title="Redistribution (economics)">redistribution</a> will be necessary. They argue that it cannot cause <a href="/wiki/Inflation" title="Inflation">inflation</a> and is of particular importance as more of the physical contribution to production is <a href="/wiki/Robots" class="mw-redirect" title="Robots">automated</a>.<sup id="cite_ref-17" class="reference"><a href="#cite_note-17"><span class="cite-bracket">[</span>17<span class="cite-bracket">]</span></a></sup> and that the Binary economics paradigm<sup id="cite_ref-18" class="reference"><a href="#cite_note-18"><span class="cite-bracket">[</span>18<span class="cite-bracket">]</span></a></sup> is particularly helpful in addressing the issue of why <a href="/wiki/Developing_country" title="Developing country">developing countries</a> languish.<sup id="cite_ref-19" class="reference"><a href="#cite_note-19"><span class="cite-bracket">[</span>19<span class="cite-bracket">]</span></a></sup> Advocates<sup id="cite_ref-Rodney_Shakespeare_2002_15-1" class="reference"><a href="#cite_note-Rodney_Shakespeare_2002-15"><span class="cite-bracket">[</span>15<span class="cite-bracket">]</span></a></sup> contend that implementing their system will lessen national debt and encourage national unity. They believe binary economics could create a <a href="/wiki/Business_cycle#Preventing_business_cycles" title="Business cycle">stable economy</a>. </p> <div class="mw-heading mw-heading2"><h2 id="Productiveness_vs._productivity">Productiveness vs. productivity</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=4" title="Edit section: Productiveness vs. productivity"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Binary <b>productiveness</b> is distinctly different from the conventional economic concept of <a href="/wiki/Productivity" title="Productivity">productivity</a>.<sup id="cite_ref-20" class="reference"><a href="#cite_note-20"><span class="cite-bracket">[</span>20<span class="cite-bracket">]</span></a></sup> Binary productiveness attempts to quantify the proportion of output contributed by total labor input and total capital input respectively,<sup id="cite_ref-21" class="reference"><a href="#cite_note-21"><span class="cite-bracket">[</span>21<span class="cite-bracket">]</span></a></sup> Adding capital inputs to a production process increases <a href="/wiki/Labor_productivity" class="mw-redirect" title="Labor productivity">labor productivity</a>, but binary economic theory argues that it decreases <i>labor productiveness</i> (i.e. the proportion of the total output with the support of both labor and capital that the labor inputs could have produced alone). For example, if the invention of a shovel allows a laborer to dig a hole in quarter of the time it would take him without the spade, binary economists would consider 75% of the "productiveness" to come from the shovel and only 25% from the laborer. </p><p>Roth criticised the shovel example on the basis that the shovel is not a factor of production independent of <a href="/wiki/Human_capital" title="Human capital">human capital</a> because somebody invented it, and the shovel cannot act independently: the physical productiveness of the shovel before labour is added to it is zero.<sup id="cite_ref-22" class="reference"><a href="#cite_note-22"><span class="cite-bracket">[</span>22<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-23" class="reference"><a href="#cite_note-23"><span class="cite-bracket">[</span>23<span class="cite-bracket">]</span></a></sup> </p><p>Kelso used the concept of productiveness to support his theory of distributive justice, arguing that as capital increasingly substitutes for labor: "workers can legitimately claim from their aggregate labor only a decreasing percentage of total output",<sup id="cite_ref-24" class="reference"><a href="#cite_note-24"><span class="cite-bracket">[</span>24<span class="cite-bracket">]</span></a></sup> implying they would need to acquire capital holdings to maintain their level of income. In <i>The Capitalist Manifesto</i>, Kelso boldly asserted: </p> <blockquote> <p>"It is, if anything an underestimation rather than an exaggeration to say that the aggregate physical contribution to the production of the wealth of the workers in the United States today accounts for less than 10 percent of the wealth produced, and that the contribution by the owners of capital instruments, through their physical instruments, accounts in physical terms for more than 90 percent of the wealth produced" <sup id="cite_ref-Kelso,_Louis_1958_p.53_25-0" class="reference"><a href="#cite_note-Kelso,_Louis_1958_p.53-25"><span class="cite-bracket">[</span>25<span class="cite-bracket">]</span></a></sup> </p> </blockquote> <p>Whilst the increased importance of capital as a factor of production following the <a href="/wiki/Industrial_Revolution" title="Industrial Revolution">Industrial Revolution</a> has long been accepted even by those believing economic value derives from labour such as Marx,<sup id="cite_ref-26" class="reference"><a href="#cite_note-26"><span class="cite-bracket">[</span>26<span class="cite-bracket">]</span></a></sup> Kelso's figures suggesting that value was created almost entirely by capital were dismissed by academic economists like Paul Samuelson.<sup id="cite_ref-Samuelson_9-1" class="reference"><a href="#cite_note-Samuelson-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> Samuelson asserted that Kelso's had not used any <a href="/wiki/Econometric" class="mw-redirect" title="Econometric">econometric</a> analysis to arrive at his figures, which completely contradicted economists' empirical findings on the contribution of labour. <i>The Capitalist Manifesto</i> did not provide detailed calculations to support Kelso's claim, although a footnote<sup id="cite_ref-Kelso,_Louis_1958_p.53_25-1" class="reference"><a href="#cite_note-Kelso,_Louis_1958_p.53-25"><span class="cite-bracket">[</span>25<span class="cite-bracket">]</span></a></sup> suggested that it was based on a simple comparison with 1850s labour productivity figures. </p> <div class="mw-heading mw-heading2"><h2 id="Employee_stock_ownership_plan_(ESOPs)_and_other_plans"><span id="Employee_stock_ownership_plan_.28ESOPs.29_and_other_plans"></span>Employee stock ownership plan (ESOPs) and other plans</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=5" title="Edit section: Employee stock ownership plan (ESOPs) and other plans"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p><a href="/wiki/Employee_stock_ownership_plan" class="mw-redirect" title="Employee stock ownership plan">Employee stock ownership plans</a> (ESOPs) are compatible with some of the principles of binary economics.<sup id="cite_ref-27" class="reference"><a href="#cite_note-27"><span class="cite-bracket">[</span>27<span class="cite-bracket">]</span></a></sup> These stem originally from Louis Kelso & Patricia Hetter Kelso (1967)<i>Two-Factor Theory: The Economics of Reality</i>; the founding of <a href="/wiki/Kelso_%26_Company" title="Kelso & Company">Kelso & Company</a> in 1970; and then from conversations in the early 1970s between Louis Kelso, Norman Kurland (<a href="/wiki/Center_for_Economic_and_Social_Justice" title="Center for Economic and Social Justice">Center for Economic and Social Justice</a>), Senator <a href="/wiki/Russell_Long" class="mw-redirect" title="Russell Long">Russell Long</a> of Louisiana (Chairman, USA Senate Finance Committee, 1966–81) and Senator <a href="/wiki/Mike_Gravel" title="Mike Gravel">Mike Gravel</a> of Alaska. There are about 11,500 ESOPs in the USA today covering 11 million employees in closely held companies.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (March 2015)">citation needed</span></a></i>]</sup> </p> <div class="mw-heading mw-heading2"><h2 id="Uses_of_central_bank-issued_interest-free_loans">Uses of central bank-issued interest-free loans</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=6" title="Edit section: Uses of central bank-issued interest-free loans"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Binary economics proposes that central bank-issued interest-free loans should be administered by the banking system for the development and spreading of productive (and the associated consuming) capacity, particularly new capacity, as well as for environmental and public capital. While no interest would be charged, there would be an administrative cost as well as collateralization or capital credit insurance.<sup id="cite_ref-28" class="reference"><a href="#cite_note-28"><span class="cite-bracket">[</span>28<span class="cite-bracket">]</span></a></sup> </p><p>Proponents of binary economics are dissatisfied with <a href="/wiki/Fractional-reserve_banking" title="Fractional-reserve banking">fractional-reserve banking</a>, arguing that it "creates new money out of nothing".<sup id="cite_ref-29" class="reference"><a href="#cite_note-29"><span class="cite-bracket">[</span>29<span class="cite-bracket">]</span></a></sup> The supply of interest-free loans would place in circumstances of a move (over time) towards banks maintaining reserves equal to <a href="/wiki/Full-reserve_banking" title="Full-reserve banking">100% of their deposits</a>; in practice, the large-scale interest-free lending desired by binary economics is compatible with the widespread reduction in money supply that would be caused by increased reserve requirements only if the government takes over the banks' role in credit creation. </p> <div class="mw-heading mw-heading3"><h3 id="Investments_eligible_for_interest-free_loans">Investments eligible for interest-free loans</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=7" title="Edit section: Investments eligible for interest-free loans"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Binary economics suggests that ownership of productive (and the associated consuming) capacity, particularly new capacity, could be spread by the use of central bank-issued interest-free loans.<sup id="cite_ref-30" class="reference"><a href="#cite_note-30"><span class="cite-bracket">[</span>30<span class="cite-bracket">]</span></a></sup> Interest-free loans should be allowed for private capital investment <i>IF such investment creates new owners of capital and is part of national policy to enable all individuals, over time, on market principles, to become owners of substantial amounts of productive, income-producing capital</i>.<sup id="cite_ref-31" class="reference"><a href="#cite_note-31"><span class="cite-bracket">[</span>31<span class="cite-bracket">]</span></a></sup> By using central bank-issued interest-free loans, a large corporation would get cheap money as long as new binary shareholders are created. </p> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=8" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist reflist-columns references-column-width" style="column-width: 20em;"> <ol class="references"> <li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://www.cesj.org/binary-economics-in-a-nutshell/">"Binary Economics in a Nutshell | Center for Economic & Social Justice"</a>. 2012-02-01<span class="reference-accessdate">. Retrieved <span class="nowrap">2024-11-27</span></span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=Binary+Economics+in+a+Nutshell+%7C+Center+for+Economic+%26+Social+Justice&rft.date=2012-02-01&rft_id=https%3A%2F%2Fwww.cesj.org%2Fbinary-economics-in-a-nutshell%2F&rfr_id=info%3Asid%2Fen.wikipedia.org%3ABinary+economics" class="Z3988"></span></span> </li> <li id="cite_note-Rodney_Shakespeare_2007-2"><span class="mw-cite-backlink">^ <a href="#cite_ref-Rodney_Shakespeare_2007_2-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Rodney_Shakespeare_2007_2-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text">Rodney Shakespeare (2007) <i>The Modern Universal Paradigm</i>.</span> </li> <li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text">Roy Madron & John Jopling (2003) <i>Gaian Democracies</i></span> </li> <li id="cite_note-4"><span class="mw-cite-backlink"><b><a href="#cite_ref-4">^</a></b></span> <span class="reference-text"><a href="/wiki/Michael_Rowbotham" title="Michael Rowbotham">Michael Rowbotham</a> (1998) <i>The Grip of Death</i>. James Gibb Stuart (1983) <i>The Money Bomb</i>.</span> </li> <li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text">Rodney Shakespeare (2007) op. cit.</span> </li> <li id="cite_note-6"><span class="mw-cite-backlink"><b><a href="#cite_ref-6">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="http://www.kelsoinstitute.org/pdf/cm-entire.pdf">"The Capitalist Manifesto"</a> <span class="cs1-format">(PDF)</span><span class="reference-accessdate">. Retrieved <span class="nowrap">2011-02-20</span></span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=The+Capitalist+Manifesto&rft_id=http%3A%2F%2Fwww.kelsoinstitute.org%2Fpdf%2Fcm-entire.pdf&rfr_id=info%3Asid%2Fen.wikipedia.org%3ABinary+economics" class="Z3988"></span></span> </li> <li id="cite_note-7"><span class="mw-cite-backlink"><b><a href="#cite_ref-7">^</a></b></span> <span class="reference-text">Louis Kelso & Patricia Hetter Kelso (1986 & 1991) <i>Democracy and Economics Power - Extending the ESOP Revolution through Binary Economics</i></span> </li> <li id="cite_note-8"><span class="mw-cite-backlink"><b><a href="#cite_ref-8">^</a></b></span> <span class="reference-text">Friedman, Milton & Friedman, Rose D. <i>Two Lucky People: A memoir</i>, University of Chicago Press, p.275</span> </li> <li id="cite_note-Samuelson-9"><span class="mw-cite-backlink">^ <a href="#cite_ref-Samuelson_9-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Samuelson_9-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text">D'Art, Darryl (1992) <i>Economic democracy and financial participation: a comparative study</i>, Routledge p.96</span> </li> <li id="cite_note-10"><span class="mw-cite-backlink"><b><a href="#cite_ref-10">^</a></b></span> <span class="reference-text">Robert Ashford & Rodney Shakespeare (1999) <i>Binary Economics – the new paradigm</i></span> </li> <li id="cite_note-11"><span class="mw-cite-backlink"><b><a href="#cite_ref-11">^</a></b></span> <span class="reference-text">Robert Ashford (1990) <i>The Binary Economics of Louis Kelso: the Promise of Universal Capitalism</i> (Rutgers Law Journal, vol. 22 No.1. Fall, 1990).</span> </li> <li id="cite_note-12"><span class="mw-cite-backlink"><b><a href="#cite_ref-12">^</a></b></span> <span class="reference-text">Robert Ashford & Rodney Shakespeare (1999) op. cit;</span> </li> <li id="cite_note-13"><span class="mw-cite-backlink"><b><a href="#cite_ref-13">^</a></b></span> <span class="reference-text"><i><a href="/wiki/Time_(magazine)" title="Time (magazine)">Time</a></i>, June 29, 1970.</span> </li> <li id="cite_note-14"><span class="mw-cite-backlink"><b><a href="#cite_ref-14">^</a></b></span> <span class="reference-text">Louis Kelso & Patricia Hetter Kelso (1967) <i>Two-Factor Theory: the Economics of Reality</i>.</span> </li> <li id="cite_note-Rodney_Shakespeare_2002-15"><span class="mw-cite-backlink">^ <a href="#cite_ref-Rodney_Shakespeare_2002_15-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Rodney_Shakespeare_2002_15-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text">Rodney Shakespeare & Peter Challen (2002) <i>Seven Steps to Justice</i>.</span> </li> <li id="cite_note-16"><span class="mw-cite-backlink"><b><a href="#cite_ref-16">^</a></b></span> <span class="reference-text">Norman Kurland, Dawn Brohawn & Michael Greaney (2004)<i>Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security</i>.</span> </li> <li id="cite_note-17"><span class="mw-cite-backlink"><b><a href="#cite_ref-17">^</a></b></span> <span class="reference-text">James S. Albus (1976) <i>Peoples' Capitalism - The Economics of The Robot Revolution</i>.</span> </li> <li id="cite_note-18"><span class="mw-cite-backlink"><b><a href="#cite_ref-18">^</a></b></span> <span class="reference-text">Sofyan Syafri Harahap (2005), <i>Accounting Crisis</i>. William Christensen <i>Search for a Universal Paradigm: Making Justice Live For All</i> International Conference on <i>Universal Paradigm of Socio-Scientific Reasoning</i>, Asian University of Bangladesh, 2005.</span> </li> <li id="cite_note-19"><span class="mw-cite-backlink"><b><a href="#cite_ref-19">^</a></b></span> <span class="reference-text">A notable lecture on this matter was given by Ing. B.J Habibie (former President, The Republic of Indonesia) at the international conference <i>Islamic Economics and Banking in the 21st Century</i>, Jakarta, Indonesia, November, 2005. See also Thoby Mutis (1995) <i>Pendekatan Ekonomi Pengetahuan dalam Manajemen Kodedeterminass</i>.</span> </li> <li id="cite_note-20"><span class="mw-cite-backlink"><b><a href="#cite_ref-20">^</a></b></span> <span class="reference-text">Mark Douglas Reiners <i>The Binary Alternative and the Future of Capitalism</i> available at <a rel="nofollow" class="external text" href="http://www.cesj.org/">Center for Economic and Social Justice</a>.</span> </li> <li id="cite_note-21"><span class="mw-cite-backlink"><b><a href="#cite_ref-21">^</a></b></span> <span class="reference-text">Robert Ashford <i>Louis Kelso’s Binary Economy</i> (The Journal of Socio-Economics, vol.25, 1996).</span> </li> <li id="cite_note-22"><span class="mw-cite-backlink"><b><a href="#cite_ref-22">^</a></b></span> <span class="reference-text">Timothy D. Terrell <i> Binary Economics: Paradigm Shift Or Cluster of Errors?</i> Ludwig von Mises Institute.</span> </li> <li id="cite_note-23"><span class="mw-cite-backlink"><b><a href="#cite_ref-23">^</a></b></span> <span class="reference-text">Timothy P. Roth, (1996) <i> A Supply-Sider’s (Sympathetic) View of Binary Economics</i>, Journal of Socio-Economics 25 (1) pp. 58–59.</span> </li> <li id="cite_note-24"><span class="mw-cite-backlink"><b><a href="#cite_ref-24">^</a></b></span> <span class="reference-text">Kelso, Louis (1958) <i>The Capitalist Manifesto</i>, Random House, p.110-11</span> </li> <li id="cite_note-Kelso,_Louis_1958_p.53-25"><span class="mw-cite-backlink">^ <a href="#cite_ref-Kelso,_Louis_1958_p.53_25-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Kelso,_Louis_1958_p.53_25-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text">Kelso, Louis (1958) <i>The Capitalist Manifesto</i>, Random House, p.53</span> </li> <li id="cite_note-26"><span class="mw-cite-backlink"><b><a href="#cite_ref-26">^</a></b></span> <span class="reference-text">Louis Kelso <i>Karl Marx: The Almost Capitalist</i> (American Bar Association Journal, March, 1957).</span> </li> <li id="cite_note-27"><span class="mw-cite-backlink"><b><a href="#cite_ref-27">^</a></b></span> <span class="reference-text">William Greider (1997) <i>One World, Ready or Not: The Manic Logic of Global Capitalism</i>.</span> </li> <li id="cite_note-28"><span class="mw-cite-backlink"><b><a href="#cite_ref-28">^</a></b></span> <span class="reference-text">Norman Kurland (1998) <i>The Federal Reserve Discount Window</i> — www.cesj.org</span> </li> <li id="cite_note-29"><span class="mw-cite-backlink"><b><a href="#cite_ref-29">^</a></b></span> <span class="reference-text">John Tomlinson (1993) <i>Honest Money</i>. Joseph Huber & James Robertson <i>Creating New Money</i>. Peter Selby (1997) <i>Grace and Mortgage</i>.</span> </li> <li id="cite_note-30"><span class="mw-cite-backlink"><b><a href="#cite_ref-30">^</a></b></span> <span class="reference-text">Shann Turnbull (1975/2000) <i>Democratising the Wealth of Nations</i> and (2001) <i>The Use of Central Banks to Spread Ownership</i>. Jeff Gates (1999) <i>The Ownership Solution</i> and (2000) <i>Democracy At Risk</i>.</span> </li> <li id="cite_note-31"><span class="mw-cite-backlink"><b><a href="#cite_ref-31">^</a></b></span> <span class="reference-text">Norman Kurland (2001) <i>Saving Social Security</i> at www.cesj.org.</span> </li> </ol></div> <div class="mw-heading mw-heading2"><h2 id="Sources">Sources</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=9" title="Edit section: Sources"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li>Albus, James S. (1976) <i>Peoples' Capitalism - The Economics of The Robot Revolution</i>.</li> <li>Ashford, Robert & Shakespeare, Rodney (1999) <i>Binary Economics - the new paradigm</i>.</li> <li>Ashford, Robert "Louis Kelso’s Binary Economy" (<i>The Journal of Socio-Economics</i>, vol. 25, 1996).</li> <li>el-Diwany, Tarek (2003) <i>The Problem With Interest</i>.</li> <li>Gates, Jeff (1999) <i>The Ownership Solution</i>.</li> <li>Gates, Jeff (2000) <i>Democracy At Risk</i>.</li> <li>Gauche, Jerry "Binary Modes for the Privatization of Public Assets" (<i>The Journal of Socio-Economics</i>. Vol. 27, 1998).</li> <li>Greenfield, Sidney M. <i>Making Another World Possible: the Torah, Louis Kelso and the Problem of Poverty</i> (paper given at conference, Columbia University, May, 2006).</li> <li>Kelso, Louis & Kelso, Patricia Hetter (1986 & 1991), <i>Democracy and Economic Power - Extending the ESOP Revolution through Binary Economics</i>.</li> <li>Kelso, Louis & Adler, Mortimer (1958), <i>The Capitalist Manifesto</i>.</li> <li>Kelso, Louis & Adler, Mortimer (1961), <i>The New Capitalists</i>.</li> <li>Kelso, Louis & Hetter, Patricia (1967), <i>Two-Factor Theory: the Economics of Reality</i>.</li> <li>Kurland, Norman <i>A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation</i>.</li> <li>Kurland, Norman; Brohawn, Dawn & Michael Greaney (2004) <i>Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security</i>.</li> <li>Miller, J.H. ed., (1994), <i>Curing World Poverty: The New Role of Property</i>.</li> <li>Reiners, Mark Douglas, <i>The Binary Alternative and Future of Capitalism</i>.</li> <li>Schmid, A. Allan,(1984), “Broadening Capital Ownership: The Credit System as a Focus of Power", in Gar Alperovitz and Roger Skurski,eds. <i>American Economic Policy</i>, University of Notre Dame Press.</li> <li>Shakespeare, Rodney & Challen, Peter (2002) <i>Seven Steps to Justice</i>.</li> <li>Shakespeare, Rodney (2007) <i>The Modern Universal Paradigm</i>.</li> <li>Turnbull, Shann (2001) <i>The Use of Central Banks to Spread Ownership</i>.</li> <li>Turnbull, Shann (1975/2000), <i>Democratising the Wealth of Nations</i>.</li></ul> <div class="mw-heading mw-heading2"><h2 id="External_links">External links</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Binary_economics&action=edit&section=10" title="Edit section: External links"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a rel="nofollow" class="external text" href="http://www.binaryeconomics.net/">Binary Economics now</a></li></ul> <div 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economic thought">Schools of economic thought</a></div></th></tr><tr><th scope="row" class="navbox-group" style="width:1%">Pre-modern</th><td class="navbox-list-with-group navbox-list navbox-odd hlist" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Ancient_economic_thought" title="Ancient economic thought">Ancient schools</a></li> <li><a href="/wiki/History_of_Islamic_economics" title="History of Islamic economics">Medieval Islamic</a></li> <li><a href="/wiki/Scholasticism" title="Scholasticism">Scholasticism</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Modern era</th><td class="navbox-list-with-group navbox-list navbox-odd hlist" style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Early_modern_philosophy" title="Early modern philosophy">Early 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