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 economist Robert Ashford identifies 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:
1. 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.
2. 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.)
3. Harmonic Justice, 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.
Binary Growth. Within binary theory, this concept holds that economies grow steadily larger as private capital
acquisition is distributed more broadly among the population on market principles. This concept also focuses on the
importance of unleashing the unutilized or underutilized capacity of all economic systems to produce in greater
abundance.
Binary Productiveness. This concept states that while humans contribute to economic growth through all forms of
labor, capital assets such as machines and technological processes are making an even bigger, ever-increasing
contribution to overall output, in relation to that contributed by human labor.
Binary Property Right. This concept refers to the right of every person to acquire, on market principles, private
(individual and joint) ownership of wealth-creating capital assets.
