User:Janosabel/National Institute of Pension Administrators

National Institute of Pension Administrators

NIPA represents the retirement and employee benefit plan administration profession

Note: I started this page after I wanted to add another item to the Nipa disambiguation page

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For the time being salvaging beleaguered entry (also disputes about it) on Binary Economics

Binary economics is a heterodox theory of economics that endorses both private property and a free market but proposes significant reforms to the banking system. The aim of binary economics is to ensure that all individuals receive income from their own independent capital estate,[1] using interest-free loans issued by a central bank to promote the spread of employee-owned firms.[2] These loans are intended to: halve infrastructure improvement costs, reduce business startup costs, and widen stock ownership.

Binary economics is a minority discipline, hard to place on the left-right spectrum.[3] It has variously been characterized as an extreme right-wing ideology and as extremely left-wing by its critics.[4][5] The ‘binary’ (in ‘binary economics’) means ‘composed of two’ because it suffices to view the physical factors of production as being but two (labour and capital which includes land) and only two ways of genuinely earning a living − by labour and by productive capital ownership. Humans are usually considered as owning their labour, but not necessarily the other productive factor – capital.[6]

Binary economics is partly based on belief that society has an absolute duty to ensure that all humans have good health, housing, education and an independent income, as well as a responsibility to protect the environment for its own sake. The interest-free loans proposed by binary economics are compatible with the traditional opposition of the Abrahamic religions to usury.[7]

Proponents[8] of binary economics claim that their system contains no expropriation of wealth, and much less redistribution will be necessary. They argue that it cannot cause inflation and is of particular importance as more of the physical contribution to production is automated.[9] and that the Binary economics paradigm[10] is particularly helpful in addressing the issue of why developing countries languish.[11] Advocates[12] contend that implementing their system will lessen national debt and encourage national unity. They believe binary economics could create a stable economy. Contents [hide]

   1 Background
   2 Employee Share Ownership Plans (ESOPs) and other plans
   3 Conventional economics compared with binary economics - areas of conflict, criticism and contrast
   4 Uses of central bank-issued interest-free loans
       4.1 Investments eligible for interest-free loans
           4.1.1 Public capital investment
           4.1.2 Private capital investment
   5 Productiveness
   6 Estate duty
   7 References
   8 Texts
   9 External links

[edit] Background

Binary Economics was proposed by American lawyer Louis Kelso in his book The Capitalist Manifesto (1958). The title of the book is best viewed as a thing of its time, being a Cold War reference in opposition to communism. [13]

Kelso also wrote The New Capitalists in 1961; then Kelso teamed up with political scientist Patricia Hetter Kelso to explain how capital instruments provide an increasing percentage of the wealth and why capital is narrowly owned in the modern industrial economy.[14] Their analysis predicts that widely distributed capital ownership will create a more balanced economy. This is at the heart of the binary claim to create an efficiency which creates justice and vice versa.

Kelso and Hetter then 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. [edit] Employee Share Ownership Plans (ESOPs) and other plans

Employee Share Ownership Plans (ESOPs) are compatible with some of the principles of binary economics.[15] These stem originally from Louis Kelso & Patricia Hetter Kelso (1967)Two-Factor Theory: The Economics of Reality; 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), Senator Russell Long of Louisiana (Chairman, USA Senate Finance Committee, 1966 - 1981) and Senator Mike Gravel of Alaska. There are about 11,500 ESOPs in the USA today covering 11 million employees in closely held companies. [edit] Conventional economics compared with binary economics - areas of conflict, criticism and contrast

Conventional economics upholds productivity[16] which is not a direct analysis of physical reality: rather it is the calculation of a ratio or rate of total output divided by unit of input (though usually having separate labour & capital goods input-components, e.g. Cobb-Douglas). In contrast, the binary analysis of productiveness (see section below) attempts to give accurate credit to the physical contributions of both labour and capital goods to production, attempting to answer a fundamental economic question - Who or what physically creates the wealth?

Another contrast is that, in evidence-based economics, interest (as distinct from administration cost) is practically always necessary; in Binary Economics theory it isn't (certainly where the development and spreading of productive capacity is concerned).[17] Conventional economics accounts for the observed time value of money, whereas binary economics does not.

Binary economics also rejects conventional financial savings doctrine (that there must be financial savings prior to investment) - no financial saving is necessary if money can be created out of nothing.[18] The theory asserts that what matters is whether the newly-created money is interest-free, whether it can be repaid, whether there is effective collateral and whether it goes towards the development and spreading of various forms of productive (and the associated consuming) capacity.

Very fundamentally, binary economics rejects the claim of conventional economics that it promotes a ‘free market’ which is free, fair and efficient. (e.g., as an interpretation of the classical First Fundamental Theorem of Welfare Economics).

The two economics differ on the subject of democracy. Conventional economics upholds the periodic political vote. Binary economics does the same but claims to deepen democracy[19] by arguing that productive capital would be more widely distributed too. In binary economics freedom is only truly achieved if all individuals are able to acquire an independent economic base. [edit] Uses of central bank-issued interest-free loans

Binary economics proposes that central bank-issued interest-free loans should be administered by the banking system for the development and spreading of productive (and the associated consuming) capacity, particularly new capacity, as well as for environmental and public capital. While no interest would be charged, there would be an administrative cost as well as collateralization or capital credit insurance.[20]

Proponents of binary economics are dissatisfied with fractional reserve banking, arguing that it "creates new money out of nothing".[21] The supply of interest-free loans would place in circumstances of a move (over time) towards banks maintaining reserves equal to 100% of their deposits; in practice, the large-scale interest-free lending desired by binary economics is incompatible with the widespread reduction in money supply that would be caused by increased reserve requirements. [edit] Investments eligible for interest-free loans [edit] Public capital investment

Interest-free loans for public capital have been successfully used in Canada, New Zealand and Guernsey. Malaysia is today believed to be experimenting with them.[22]

After 1949 central bank loans were a major factor in the Taiwanese Land to the Tiller program which spread land ownership from the few to the many. This was done without causing inflation and was an overall binary solution because, in various ways the money went into the spreading of both productive and consuming capacity.[23] (One way was by financing the buyout with industrial bonds, thus giving capital to small industries to provide things for the newly empowered farmers to purchase.) [edit] Private capital investment

Ownership of productive (and the associated consuming) capacity, particularly new capacity, can be spread by the use of central bank-issued interest-free loans.[24] Interest-free loans should be allowed for private capital investment IF such investment creates new owners of capital and is part of national policy to enable all individuals, over time, on market principles, to become owners of substantial amounts of productive, income-producing capital.[25] By using central bank-issued interest-free loans, a large corporation would get cheap money as long as new binary shareholders are created.

It is proposed that all large corporations should have to pay out all their earnings all the time (with exception of reserves for maintenance, depreciation, repair and research). Large corporations will then have the option of obtaining interest-free loans on condition that they help to spread ownership. Medium-sized corporations (which would not be subject to the full pay out provision) will be able to have interest-free loans if they spread ownership. [edit] Productiveness

Binary productiveness and conventional productivity are distinct concepts.[26]

Conventional productivity, generally labour productivity, is the ratio of labor as input to the overall output.[27]

In contrast, binary productiveness is the percentage of total physical input that labor and capital each contributes to the output.[28] Capital contributes an increasing physical percentage as even Marx understood.[29] Consider the example of a man digging a hole. Using his hands this takes him four hours. But, by using a form of capital − a shovel − he can dig the hole in one hour or dig four holes in the same amount of time it took him to dig one hole with his hands. The physical productiveness of the human labor is 25% while the physical productiveness of the capital shovel is 75%.

A criticism of the hole and shovel example has been made by Timothy D. Terrell[30] summarizing a critique given by Timothy Roth.[31] The criticism states that: a) somebody invented the shovel; b) the shovel cannot be independent. Roth argues that someone with human capital had to invent the shovel before it could be used, so the presence of the shovel is not independent of human capital. Also, Roth notes the presumption that the human hole digger has no role in the productiveness of the shovel.

However, binary economics states that the fact that somebody invented the shovel has nothing to do with its present use for digging a hole and the shovel is viewed as an independent contributor which co-operates with the man just as the man co-operates with the shovel. Moreover, just as two humans can co-operate, so the man and the shovel co-operate to dig the hole and produce far more holes than either the man or shovel could do by themselves. [edit] Estate duty

As part of binary policy to develop capital ownership for each member of the population, there is no estate duty (or Inheritance tax) on death if the estate devolves in such a way as to spread capital estates to more individuals. If it does not do so, binary economics proposes a graduated tax. [edit] References

   ^ Robert Ashford & Rodney Shakespeare (1999) Binary Economics – the new paradigm
   ^ Rodney Shakespeare (2007) The Modern Universal Paradigm.
   ^ Robert Ashford (1990) The Binary Economics of Louis Kelso: the Promise of Universal Capitalism (Rutgers Law Journal, vol. 22 No.1. Fall, 1990).
   ^ Robert Ashford & Rodney Shakespeare (1999) op. cit;
   ^ Time Magazine, June 29, 1970.
   ^ Louis Kelso & Patricia Hetter Kelso (1967) Two-Factor Theory: the Economics of Reality.
   ^ Rodney Shakespeare & Peter Challen (2002) Seven Steps to Justice.
   ^ Norman Kurland, Dawn Brohawn & Michael Greaney (2004)Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security.
   ^ James S. Albus (1976) Peoples' Capitalism - The Economics of The Robot Revolution.
   ^ Sofyan Syafri Harahap (2005), Accounting Crisis. William Christensen Search for a Universal Paradigm: Making Justice Live For All International Conference on Universal Paradigm of Socio-Scientific Reasoning, Asian University of Bangladesh, 2005.
   ^ A notable lecture on this matter was given by Ing. B.J Habibie (former President, The Republic of Indonesia) at the international conference Islamic Economics and Banking in the 21st Century, Jakarta, Indonesia, November, 2005. The former President, a successful aircraft engineer, well understands the potential of technology to create wealth. See also Thoby Mutis (1995) Pendekatan Ekonomi Pengetahuan dalam Manajemen Kodedeterminass.
   ^ Rodney Shakespeare & Peter Challen (2002) Seven Steps to Justice.
   ^ "The Capitalist Manifesto". Retrieved 2011-02-20.
   ^ Louis Kelso & Patricia Hetter Kelso (1986 & 1991) Democracy and Economics Power - Extending the ESOP Revolution through Binary Economics
   ^ William Greider (1997) One World, Ready or Not: The Manic Logic of Global Capitalism.
   ^ Robert A. Solo (1991) The Philosophy of Science and Economics
   ^ Rodney Shakespeare (2007) op. cit.
   ^ Michael Rowbotham (1998) The Grip of Death. James Gibb Stuart (1983) The Money Bomb.
   ^ Roy Madron & John Jopling (2003) Gaian Democracies.
   ^ Norman Kurland (1998) The Federal Reserve Discount Window — www.cesj.org
   ^ John Tomlinson (1993) Honest Money. Joseph Huber & James Robertson Creating New Money. Peter Selby (1997) Grace and Mortgage.
   ^ Rodney Shakespeare & Peter Challen (2002) op. cit.
   ^ John Medaille (2007) The Vocation of Business: Social Justice in the Marketplace.
   ^ Shann Turnbull (1975/2000) Democratising the Wealth of Nations and (2001) The Use of Central Banks to Spread Ownership. Jeff Gates (1999) The Ownership Solution and (2000) Democracy At Risk.
   ^ Norman Kurland (2001) Saving Social Security at www.cesj.org.
   ^ Mark Douglas Reiners The Binary Alternative and the Future of Capitalism available at Center for Economic and Social Justice.
   ^ Robert Ashford Binary Economics − an overview (2006) http://ssrn.com/abstract=928752.
   ^ Robert Ashford Louis Kelso’s Binary Economy (The Journal of Socio-Economics, vol.25, 1996).
   ^ Louis Kelso Karl Marx: The Almost Capitalist (American Bar Association Journal, March, 1957).
   ^ Timothy D. Terrell Binary Economics: Paradigm Shift Or Cluster of Errors? Ludwig von Mises Institute.
   ^ Timothy P. Roth, (1996) A Supply-Sider’s (Sympathetic) View of Binary Economics, Journal of Socio-Economics 25 (1) pp. 58–59.

[edit] Texts

   Albus, James S.(1976) Peoples’ Capitalism - The Economics of The Robot Revolution.
   Ashford, Robert & Shakespeare, Rodney (1999) Binary Economics - the new paradigm.
   Ashford, Robert Louis Kelso’s Binary Economy (The Journal of Socio-Economics, vol. 25, 1996).
   el-Diwany, Tarek (2003) The Problem With Interest.
   Gates, Jeff (1999) The Ownership Solution.
   Gates, Jeff (2000) Democracy At Risk.
   Gauche, Jerry Binary Modes for the Privatization of Public Assets (The Journal of Socio-Economics. Vol. 27, 1998).
   Greenfield, Sidney M. Making Another World Possible: the Torah, Louis Kelso and the Problem of Poverty (paper given at conference, Columbia University, May, 2006).
   Kelso, Louis & Kelso, Patricia Hetter (1986 & 1991), Democracy and Economic Power - Extending the ESOP Revolution through Binary Economics.
   Kelso, Louis & Adler, Mortimer (1958), The Capitalist Manifesto.
   Kelso, Louis & Adler, Mortimer (1961), The New Capitalists.
   Kelso, Louis & Hetter, Patricia (1967), Two-Factor Theory: the Economics of Reality.
   Kurland, Norman A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation.
   Kurland, Norman; Brohawn, Dawn & Michael Greaney (2004) Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security.
   Miller, J.H. ed., (1994), Curing World Poverty: The New Role of Property.
   Reiners, Mark Douglas, The Binary Alternative and Future of Capitalism.
   Schmid, A. Allan,(1984), “Broadening Capital Ownership: The Credit System as a Focus of Power," in Gar Alperovitz and Roger Skurski,eds. American Economic Policy, University of Notre Dame Press.
   Shakespeare, Rodney & Challen, Peter (2002) Seven Steps to Justice.
   Shakespeare, Rodney (2007) The Modern Universal Paradigm.
   Turnbull, Shann (2001) The Use of Central Banks to Spread Ownership.
   Turnbull, Shann (1975/2000), Democratising the Wealth of Nations.

[edit] External links

   Binary Economics now
   Center for the Study of The Great Ideas
   Binary Economics In A Nutshell
   Center for Economic and Social Justice
   Global Justice Movement Net
   Global Justice Movement Org
   Integrating Islamic Finance into Mainstream
   Binary Economics - An Overview by Professor Robert Ashford
   The Binary Alternative & The Future of Capitalism
   The Binary Economics of Louis Kelso
   http://ssrn.com/abstract=277508
   http://www.cesj.org/binaryeconomics/price-money.html
   http://cog.kent.edu/lib/TurnbullBook/TurnbullBook.htm
   Capital Democratization
   Committee on Monetary & Economic Reform

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External links

• NIPA