Binary economics addresses the basic economic question of "How is wealth created?"
It recognises that with the onset of the industrial revolution about 250 years ago the world entered into a new phase of development. One of the characteristics of this new departure is the relentless reduction of the labour element in the economic production process by the introduction of an increasingly powerful and sophisticated capital element.
Think about transporting goods by sailing barges or horse drawn carts as opposed to steam ships, railways and lorries. A parallel adoption of inanimate "energy slaves" in the production of goods has produced a "crisis of capitalism" by the beginning of the twentieth century.
Binary economics emerged in the 1930s as an alternative economic paradigm to replace economic theories based on concepts that could only explain pre-industrialist economic realities. Essentially, it advocates the need for a distribution system in economics which provides two streams of income for people as consumers. One stream increases in volume as need for labour --- therefore income from labour --- is decreasing. The other stream remains a residual and diminishing source to represent labour still required in inventing, designing and construing the capital infrastructure demanded by late 20th and 21st century's post industrialized capitalist economies.
In essence this means that everyone becomes a capitalist through the widest possible distribution of productive and income generating ownership of capital assets. As a result, the so called "unemployment problem" is seen in a new light in which labour is no longer "a factor of production" but the designer, employer and beneficiary of creative capital.
The new paradigm championed by binary economics makes such a near utopian vision a realisable possibility.
It recognises that with the onset of the industrial revolution about 250 years ago the world entered into a new phase of development. One of the characteristics of this new departure is the relentless reduction of the labour element in the economic production process by the introduction of an increasingly powerful and sophisticated capital element.
Think about transporting goods by sailing barges or horse drawn carts as opposed to steam ships, railways and lorries. A parallel adoption of inanimate "energy slaves" in the production of goods has produced a "crisis of capitalism" by the beginning of the twentieth century.
Binary economics emerged in the 1930s as an alternative economic paradigm to replace economic theories based on concepts that could only explain pre-industrialist economic realities. Essentially, it advocates the need for a distribution system in economics which provides two streams of income for people as consumers. One stream increases in volume as need for labour --- therefore income from labour --- is decreasing. The other stream remains a residual and diminishing source to represent labour still required in inventing, designing and construing the capital infrastructure demanded by late 20th and 21st century's post industrialized capitalist economies.
In essence this means that everyone becomes a capitalist through the widest possible distribution of productive and income generating ownership of capital assets. As a result, the so called "unemployment problem" is seen in a new light in which labour is no longer "a factor of production" but the designer, employer and beneficiary of creative capital.
The new paradigm championed by binary economics makes such a near utopian vision a realisable possibility.
Peter Greenfinch
Untitled
Who will pay in the end for the cost and risk - compared to which the subprime crisis would appear as a piece of cake - if not the population?
Worse still, what dictatorship the beloved "binary economics" and its (actually non binary, as money creation - and worse, money allocation - would fully ends up in state's hands) monolithic / monopolistic "distribution system" would bring under the cover of good intentions?
As I said in another comment, can you make a knol making a logical and realistic demonstration of what you envision and its real consequences, on the basis of what really makes people behave, not on the motivations that would be decided for them? I understand that there are individual biases and social biases affecting the economy, I wrote extensively about them, but the fads imposed by an authoritative State apparatus, at the detriment of freedom, are much worse.
Sorry, but it seems to me that that binary economy proposal, unless fully revised, would bring a nightmare if applied. Which luckily it will not be, just because most people, whatever their flaws and herd behaviors (a topic I know well), have some common sense and education and would not trust their would-be "saviors" too much or for too long.
Your first sentence makes several assumptions which I do not recognise in Binary Economics (I do agree the label is probably unfortunate). I respond to two of them only for now.
Capital.
It is important to agree, if only for the purposes of this discussion, what we mean by the word. I suggest that capital is tools or systems that facilitate production. Lumps of accumulated money is not capital. Therefore the question of interest does not arise. Capital, properly deployed, earns and *pays for its own costs* --- including the cost of insurance against risk.
I prefer to go slowly. So if we cannot agree here there is no point in proceeding to the other issues since these thing is related.
Money to buy productive capital.
It is not a gift but a *loan* asnd it is repaid (therefore non-inflationary) from the earnings of capital assets. In other words, any asset in question is self-liquidating. But the loan is interest free because…
its source is the same as now: bank created credit but with no interest added since it is not borrowed from anyone but brought into existence through banks’ accounting procedures.
We do agree, don’t we, that all money (barring a trifling 3 per cent --- in the case of Britain) comes into existence as new money when a borrower is granted a loan? The loan does carry, however, its share of a commercially viable and competition controlled banking administration change.
This is a reality most people, in my experience, find very hard to believe.
So I propose to adjourn here until I see your response. Since, again, there would be no point in continuing if this fact is denied.
PS.
I also assume that we agree that the purpose of a discussion is to get at the truth of things; not to win points.
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Well I have problems to reply that I don't recognise some practical concepts in your presentation
1)if capital is not money, it is money that helps to store and move capital, and the notion of capital assets has evolved a lot since the classical economists. Even if I don't agree fully with the "efficient" pricing asumptions of the famous "capital assets pricing theory" I agree at least that the notion of capital asset is directly linked nowadays to organized markets and that capital can take various marketable forms.
2) money is not created by accounting procedure, which are just a technical tool, but by the commitment of the borrower, this commitment is the basis of money, the legitimacy of money, the guarantee of money. The subprime crisis shows how that trust in final borrowers is crucial.
3) interest, although received by the bank, is far from being only the paiement for administrative costs (and risk) , it is
passed also to the depositors of the bank who receive interest in their savings and service on their sight deposits. Any time a bank grants one cent of credit, and the borrower use the money, therefore takes it out of the bank, the bank has to find one cent of deposit to "refinance" the loan.
4) Interest itself is linked to time, to preference to liquidity by most economic agents not only to loan cost and not specifically to banking as if somebody's lend money to somebody else, dircetly or through the bank "intermediation" it usually expect an interest for not spending the money immediately, to let somebody else use it (and also for taking a risk). I don't see how the binary econcomic takes into account this basic motivation. Not to talk about perverse effects (getting free money from the binary system and lending it with interest to other people creating thus a grey money market)
The real danger of binary economics seems to be social and ethical, not is shallow approach of some concepts. But it is true that if we don't agree on the basic definitions and concepts about capital, money, interest, which are very practical things by the way, we cannot go very far in the discussion.
Peter
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I am conscious of many days passing since you replied, but can only respond briefly to your first point (and that as a non-professional).
I refer to capital in the fundamental sense of a tool. Tools are useless without being put to work. In that sense, a sum of money is not capital until it is spent to buy machinery, for example. Any work that ensues after that is not done by the money, per se. Further, the tool/machinery/facto
In brief, just because a factory can be bought with a sum of money (in whatever form), the money itself can not be said to be "working" except in the theory-ridden world of abstract economics. Binary economics is one theory that is anchored in down to earth economics.
Money.
It can be created without limit. Production of real economic goods, which give money value, suffer from natural constraints.
Without money, economic life would revert to barter, but would continue. The converse is not true. The best money would be good for, in the absence of goods, is keeping warm while going hungry.
It is like mathematics: if the mistake is made in the first stage of the calculation, no amount of tinkering would make the final sums right.
In the same way, the economic condition we see today is the cyclical result of mistaking sophisticated theoretical constructs for economic reality.
Hope this does not seem to your professional eyes as too "far out of the box" thinking.
Janos
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