{"id":8,"date":"2015-09-21T15:05:47","date_gmt":"2015-09-21T14:05:47","guid":{"rendered":"https:\/\/www.binaryeconomics.net\/wordpress\/?page_id=8"},"modified":"2019-08-21T22:34:40","modified_gmt":"2019-08-21T21:34:40","slug":"history","status":"publish","type":"page","link":"https:\/\/www.binaryeconomics.net\/wordpress\/introduction\/history\/","title":{"rendered":"History"},"content":{"rendered":"

ON THIS PAGE: Background<\/a> \u2022 Binary Economics is Outside both Left-wing and Right-wing Paradigms<\/a> \u2022 More Ground-breaking Books<\/a> \u2022 Implementation of Say\u2019s Theorem (Law)<\/a> \u2022 Meaning of \u2018Binary\u2019<\/a> \u2022 Employee Stock Ownership Plans (ESOPs)<\/a> \u2022 BUT Today’s ESOPs are NOT<\/em> True Binary ESOPs<\/a> \u2022 Other Binary Plans<\/a> \u2022 Footnotes<\/a><\/p>\n

<\/a>Background:<\/span><\/strong>\u00a0 Although elements of binary economics can be found elsewhere (e.g., Pope Leo XIII’s Rerum Novarum<\/em> 1891; the Distributism of G.K. Chesterton and Hilaire Belloc; Harold Moulton (1935) The Formation of Capital;<\/em> and Ibn Ashur (1946) Maqasid al Shari’ah al Islamiya<\/em>,[18]<\/a> the first clear formulation of the subject was in 1958.<\/p>\n

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Louis Kelso<\/em><\/figcaption><\/figure>\n

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Mortimer Adler<\/em><\/figcaption><\/figure>\n

This was done by Louis Kelso<\/strong> (lawyer and economist, 1913-1991) and Mortimer Adler<\/strong> (the American Aristotelian philosopher, 1902-2001) in their unhappily titled, but momentous, book The Capitalist Manifesto <\/em> (1958)[19]<\/a> which can be downloaded from www.kelsoinstitute.org<\/a>\u00a0 The book’s title is a Cold War nomenclature in opposition to communism,[20]<\/a> but the book’s thinking can only be truly understood as being outside all left-wing and right-wing economics and politics<\/em><\/span> — which is demonstrated by the attacks which were made.[21]<\/a><\/p>\n

<\/a>Binary Economics is Outside both Left-wing and Right-wing Paradigms<\/strong><\/span><\/p>\n

Thus, on the left, Soviet Pravda<\/em> saw the book as “ramblings based on thinking along a dead end of history”[21]<\/a> — which was an egregious \"Imagemisstatement because communism was soon to collapse and binary economics is today increasingly seen as the most modern economics of all.<\/p>\n

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Meanwhile, on the right, Milton Friedman was nonplussed and could only conclude that binary economics must be “Marxism stood on its head”.[22]<\/a><\/p>\n

Very obviously, extreme left saw binary economics as extreme right; and extreme right saw it as extreme left.<\/p>\n

And equally obviously, the puzzlement and confusion of Pravda and Friedman only served to confirm that binary economics<\/strong> is outside both left-wing and right-wing paradigms<\/span>,<\/strong><\/span> and cannot be comprehended from within those two paradigms.<\/em>[23]<\/a><\/p>\n

<\/a>More Ground-breaking Books<\/strong><\/span><\/p>\n

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Kelso and Adler[24]<\/a> (and, later, Patricia Hetter Kelso<\/em>) were to continue to write ground-breaking books[25]<\/a> explaining how capital instruments provide an increasing percentage of the wealth and, crucially, how and why capital is narrowly owned in the modern industrial economy.<\/p>\n

Their analysis then has an important consequence easily understood by market theorists — if what increasingly produces a larger percentage of the wealth (productive capital) is narrowly owned, then a properly balanced economy (implementing Say’s Theorem (Law) that producers and consumers must be the same people) cannot come into being unless<\/span>,<\/strong> on true free market and private property principles, productive capital becomes much more widely owned<\/em>.[26]<\/a> This is at the heart of the binary claim to create an efficiency which creates justice and vice versa.[27]<\/a><\/p>\n

In the UK in 1976 Rodney Shakespeare and Wilf Proudfoot wrote The Two-Factor Nation<\/em>.<\/p>\n

<\/a>Implementation of Say’s Theorem (Law)<\/strong><\/span><\/p>\n

Kelso and Hetter gave practical form to their thinking and proposed new binary share holdings which (with exception for research, maintenance and depreciation) would pay out their full capital earnings, be capable of being insured and, if loss occurred, would occasion no recourse to the new binary owners.<\/p>\n

N.B.\u00a0 Because of the full payout provision the binary holdings might well pay out more than five to nine times<\/em> what is typically paid out today.[28]<\/a><\/p>\n

Thus what was being proposed was a new widespread capital ownership and associated individual incomes which can be possessed by anybody<\/em> in the population irrespective of whether or not that person is in a conventional job or not<\/em>.[29]<\/a> The practical result would be a balancing of supply and demand — with producers and consumers being the same people and supply and demand balancing each other<\/em><\/strong> — as required by Say’s Theorem (Law).<\/span><\/p>\n

(The usual phrase is ‘Say’s Law’.\u00a0 But a scientific Law is something which results from the observation of reality.\u00a0 Today, however, supply and demand do not<\/span> balance each other.\u00a0 Thus Say’s Theorem is a statement of the ideal situation but it cannot be a Law<\/span> because balance is not what happens in practice.)<\/p>\n

<\/a>Meaning of ‘Binary’<\/strong><\/span><\/p>\n

The word ‘binary’ (in ‘binary economics’) sometimes perplexes people.\u00a0 It means ‘composed of two’ because it suffices to view the factors in production as being but two (labor and capital) and thus there are only two ways of genuinely earning a living — by labor and\/or by the ownership of productive capital.[30]<\/a> In viewing the two factors it can also be observed that humans own their own labor but they do not<\/em><\/span> necessarily own the other factor — capital.[31]<\/a> There is much helpful information at www.kelsoinstitute.org<\/a> from which the text of The New Capitalists<\/em> (Kelso & Adler, 1961) can be downloaded.<\/p>\n

<\/a>Employee Stock Ownership Plans (ESOPs)<\/strong><\/span><\/p>\n

Very often the first acquaintance people have with binary economics comes through today’s Employee Stock Ownership Plans<\/strong> (ESOPs). These stem\u00a0 from Louis Kelso & Patricia Hetter Kelso (1967) Two-Factor Theory: The Economics of Reality<\/em>; the founding of Kelso & Company in 1970; and then from conversations in the early 1970s between Louis Kelso, Norman Kurland (Center for Economic and Social Justice), Jeff Gates (author of The Ownership Solution<\/em>), Dr Shann Turnbull of Australia, Senator Russell Long of Louisiana (Chairman, USA Senate Finance Committee, 1966 – 1981) and Senator Mike Gravel of Alaska<\/em>.\"Image<\/p>\n

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Wide ownership in industry<\/em><\/figcaption><\/figure>\n

Although estimates vary, there may be about 7,000 ESOPs in the USA today covering up to 20,000,000 employees. As binary economics predicts, studies have shown efficiency improvements as an effect of employee ownership and involvement — binary techniques for this are called Justice Based Management.\u00a0 The legal entity which acts for the employees and oversees the capital acquisition and distribution of profits, is the ESOP trust.<\/p>\n

<\/a>BUT today’s ESOPs are NOT<\/em> true binary ESOPs<\/span>
<\/strong><\/span><\/p>\n

Unfortunately, today’s ESOPS are not<\/span><\/strong> true binary ESOPs.\u00a0 The true binary ESOP works not only for employees but also for non-employees as well<\/span> (particularly in highly capitalized industries).\u00a0 Thus it can\u00a0 go much wider than employee ownership <\/em><\/span>and so become a capital credit device which institutionalizes the basic binary property right<\/span>:-<\/em><\/p>\n