Binary economics

The "post-scarcity" theory developed by lawyer-economist Louis O. Kelso in the 1950s. "Binary" means "consisting of two parts." Kelso divided the factors of production into two all-inclusive categories -- the human ("labor"), and the non-human ("capital"). The central tenet of binary economics is that there are two components to productive output and to income: (1) that generated by human labor, and (2) that generated by capital. Classical economic theory, on the other hand, regards all output and income to be derived from labor whose productivity is enhanced by capital.

In contrast to traditional schools of economics which assume that scarcity is inevitable, binary economics views shared abundance -- sustainable economic growth and the equitable distribution of future wealth and income throughout society -- as achievable. Binary economics holds that broad-based affluence and economic freedom, as opposed to financial insecurity and economic dependency for the many, is made possible through the widespread ownership of constantly improved capital instruments and social institutions to produce more and more consumable goods with less and less input and resources.

Binary economists Robert Ashford and Rodney Shakespeare identify three distinguishing concepts within binary theory -- binary productiveness, the binary property right, and binary growth. These components interact and reinforce one another, allowing for maximum rates of sustainable growth within a modern, globalized economy.

Binary economics recognizes a natural synergy, as opposed to an unavoidable trade-off, between economic justice and efficiency within a global free marketplace. Rejecting pure laissez-faire assumptions, binary economics holds that a truly free and just global market requires (1) effective broad-based ownership of capital, (2) the restoration of and universalized access to the full rights of private property, (3) limited economic power of the state (whose main role should be to eliminate special privileges, monopolies and other barriers to equal participation) and (4) free and open markets for determining just wages, just prices, and just profits.

The market theory of binary economics is underpinned by three interrelated principles of economic justice:


 * Participative justice, the input principle which demands as a fundamental human right, equal opportunity for every person to contribute to the production of society's marketable wealth both as a worker and as an owner of productive assets.


 * Distributive justice, the outtake principle which holds that the contribution of labor to the economic process should be compensated at the market-determined rate (or "just wage") for each particular type of human contribution to the production of marketable wealth. This principle dictates that the contribution of capital should be compensated by the "just profit" generated by the project or enterprise. (Profit is determined by the market-based rental value of contributed capital assets, or by the gross revenues resulting from market-determined "just prices" less the market-based cost of the factors of production, including labor.)


 * Harmony, the feedback principle that balances and restores participation and distribution within the economic system. This principle was referred to by Louis Kelso and Mortimer Adler as the "principle of limitation" and by others as "social justice," as it calls for the restructuring of the economic system to restore participative and distributive justice.

GLOSSARY ON CAPITAL HOMESTEADING, BINARY ECONOMICS AND THE JUST THIRD WAY. © 2004 Center for Economic and Social Justice (by permission).

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