Binary Economics

The following article is contributed by Rodney Shakespeare, Co-author (with Robert Ashford) of Binary Economics: The New Paradigm. Binary economics is most famous for its advocacy of ESOPs (Employee Stock Ownership Plans), but it has other aspects as well. This is the second in our occasionally series on alternative approaches which embody distributive principles.

Binary economics is a school of economics expressing a new universal paradigm which challenges the fundamental assumptions of conventional economics. It states that it is a private property, market economics which ensures that, over time, all individuals come to ownership of an independent capital estate providing an income.

A summary of binary economics might be – a justice which creates efficiency and an efficiency which creates justice. A more detailed summary could be – the use of central bank-issued interest-free loans, administered by the banking system, for the development and spreading of various forms of productive capacity (and the associated consuming capacity) thereby creating a balance of supply and demand and forwarding social and economic justice.
Some quick illustrations of the binary proposal to use central bank-issued interest-free loans are:−

  1. a halving or more of the usual cost of a bridge, sewage works or hospital
  2. a halving or more of the usual cost of micro-credit for poor people to start a business
  3. the enabling of any individual in the population (from a baby to a retiree) to become a shareholder in one of the great corporations. There are also binary plans for pensions and universal health care.
The key point is that binary economics is determined to spread the ownership of all forms productive capacity to everybody in the population.

But − wait a minute − isn’t that Distributism as well? And isn’t that the sort of thing which is in, or should be in, a modern Christian economics? And what, for that matter, is in, or should be in, a modern Islamic economics?

The answer is that any truly modern form of economics includes the following characteristics:–
  • markets which, in a fair and efficient way, really do work for everybody
  • private property which extends to all individuals in the population
  • a proper balance of supply and demand
  • capital ownership which extends to everybody
  • some form of independent income for everybody
  • no inflation
  • an ethic concerned with social and economic justice
  • an interest-free money supply which is totally directed at the real economy and so at the development and spreading of productive (and the associated consuming) capacity
So it could be Distributism, you might say. After all, Distributism has markets and private property; it wants social and economic justice; it wants capital ownership for all….. – yes, it could be Distributism.

Or rather, it could be Distributism IF Distributism really did have the mechanisms to achieve its aims. And IF – and this is of fundamental importance – Distributism had paradigm-altering concepts capable of challenging conventional economics so that the new ideas and policies are seen as being more realistic, more true, more just and more practical than conventional economics. It has to have these concepts because the big underlying issue is whether there is anything which can successfully challenge conventional economics, its nostrums, contradictions, injustices and inefficiencies. And not just that but it must also be something which can produce a stable economics (at a time when a global financial collapse is looking increasingly likely) and which can address the big environmental problems (and an environmental collapse is looking increasingly likely as well).

Now these are big matters and none of them can be properly addressed in an article such as this. But you might like to reflect on some of the issues in particular asking yourself what you have in common with other modern people of faith and of good faith. If you think you do have something in common then go to Wikipedia and have a look at the article on binary economics and, if you go to you can buy The Modern Universal Paradigm which deals with all these matters and more.

Rodney Shakespeare.


Unknown Sunday, September 23, 2007 at 12:01:00 PM CDT  

Hi all,

Mr. Shakespeare, I read more about "Binary Economics" on Wiki and your blog. First, why would bank depositors be bank depositors if not for some incentive such as interest, and why would they consent to loans with no such reward? (Perhaps that's two related questions, but I'm counting it as one.) And secondly, if interest isn't justified by the reality, why in the world is profit? Aren't they largely for the same reasons (time value, risk, and the price level)?

Speaking of time value, you insist that it's meaningless now, as opposed to the time of Nassau Senior, Alfred Marshall, and - was Eugen Boehm-Bawerk the third economist mentioned? You base this belief on the fact that we can now create money cybernetically. This strikes me as flawed reasoning. No, of course they didn't create money via computer in the 19th century, but they did create it thru bank ledgers. (The gold standard, btw, is essentially a house of cards, as gold can never be more than a tiny fraction of all the wealth that money represents.) The fact that these bank ledgers (perhaps there's a more technical name) are now written electronically rather than handwritten or printed is of no real importance except for the speed with which they can be communicated, for the basic principle is the same. My reasoning and yours acquires neither greater nor lesser resonance because they're not recorded on paper.

Unknown Sunday, September 23, 2007 at 12:07:00 PM CDT  

My apologies, I should have written a sentence immediately after the first one. It would have read something like, "I have two questions (arguably three) and a comment."


Anonymous,  Thursday, October 18, 2007 at 6:26:00 AM CDT  

The ideas of Binary Economics are fine to a point but they can only go so far.

With my research, and development project of Transfinancial Economics we are dealing with more radical solutions. BE puts emphasis on fair distribution of wealth which is fine but something more powerful needs to get things REALLY GOING, and yet at the same time be a "credible" system (ie. TFE).

The above essays is to be updated, and improved with new research material, and ideas for change.

Robert Searle

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