Basic Principles of Binary Economics

Basic Principles of Binary Economics

• Binary economics is a paradigm that focuses on the dignity and empowerment of each human person.
• The main goal of binary economics is to simplify the factors of production into two categories: human and non-human.

Human and Non-Human Factors of Production

• Human factors of production (labor) include all human inputs to production, such as brain work.
• Non-human factors of production (capital) include all non-human inputs to production, such as human artifacts (e.g. technology) and natural resources (e.g. land).

Productiveness

• Productiveness refers to the pro-rata contribution of labor and capital to production.
• In a free market, productiveness would be measured by the market value of the factors.
• However, in a non-free market, it's difficult to accurately measure productiveness due to interferences such as minimum wage laws and subsidies.

Savings and Investment

• Binary economics rejects the idea that savings from past production are necessary for investment in new capital.
• Instead, it advocates for the use of future savings (i.e. increased production) to finance new capital.
• This approach eliminates the need for government guesswork and manipulation of the monetary system.

Say's Law of Markets

• Say's Law states that production equals income, and therefore supply generates its own demand.
• In a just economy, production must equal consumption, and consumption must be preceded by production.
• Binary economics is based on Adam Smith's first principle of economics, which states that "consumption is the sole end and purpose of all production."

Binary Growth Principle

• The binary growth principle states that as capital ownership becomes more widespread, economies will grow steadily and supply and demand will be in balance.
• This principle is based on the idea that when people can produce with both labor and capital, they can find the best mix for themselves and produce at the optimal level.

Financing and Investment

• Under binary economics, past savings should be used for consumption, while future savings should be used for investment.
• The commercial banking system plays a key role in monetizing future savings and financing new capital.
• This approach avoids the economic dilemma, where reducing consumption to save for investment leads to a decrease in demand, and increasing consumption to stimulate demand leads to a lack of savings for investment.### New Capital Formation and Economic Paradigms
• In the current economic paradigm, people rely on past savings to finance new capital formation, which can be limiting for those who are not rich.
• This approach can lead to a decrease in labor value as people compete with capital that replaces them.

Shift from Past Savings to Future Savings

• Kelo proposed a shift from past savings to future savings to free economic growth from the limitations of past savings.
• The key to this shift is to move creditworthiness from the borrower to the investment.

Creditworthiness and Insurance

• Traditional collateral is no longer required in the future savings paradigm.
• Instead, a feasible project and good character are sufficient.
• Insurance can be used to secure against risk, replacing traditional collateral with a new form of collateral.
• Capital Credit Insurance or Capital Credit reinsurance policy can be used to cover risk.

Binary Economics Paradigm

• The binary economics paradigm allows anyone to use future savings to finance new capital, regardless of wealth or social status.
• All that is required is a creditworthy investment that can pay for itself, financed with the income it generates, and collateralized with Capital Credit Insurance.

Benefits of the Binary Economics Paradigm

• Anyone can become an owner, regardless of their circumstances.
• The economy can become balanced, with people consuming what they produce and producing what they consume.
• Money power is democratized, allowing individuals to create and use money in the right way.

Key Takeaways

• The shift from past savings to future savings can unlock economic growth and democratize access to capital.
• Creditworthiness can be shifted from the borrower to the investment, using insurance to secure against risk.
• The binary economics paradigm has the potential to create a balanced economy and empower individuals to become owners.

Binary Economics Principles

• Focuses on the dignity and empowerment of each human person
• Simplifies factors of production into two categories: human and non-human

Human and Non-Human Factors of Production

• Human factors: labor, all human inputs to production, including brain work
• Non-human factors: capital, all non-human inputs to production, including human artifacts (e.g. technology) and natural resources (e.g. land)

Productiveness

• Refers to the pro-rata contribution of labor and capital to production
• Measured by market value of factors in a free market
• Difficult to accurately measure in a non-free market due to interferences (e.g. minimum wage laws, subsidies)

Savings and Investment

• Rejects the idea that past savings are necessary for investment in new capital
• Advocates for the use of future savings to finance new capital
• Eliminates the need for government guesswork and manipulation of the monetary system

Say's Law of Markets

• States that production equals income, and therefore supply generates its own demand
• In a just economy, production must equal consumption, and consumption must be preceded by production

Binary Growth Principle

• As capital ownership becomes more widespread, economies will grow steadily and supply and demand will be in balance
• Allows people to find the best mix of labor and capital for themselves and produce at the optimal level

Financing and Investment

• Past savings should be used for consumption, while future savings should be used for investment
• Commercial banking system plays a key role in monetizing future savings and financing new capital
• Avoids the economic dilemma of reducing consumption to save for investment or increasing consumption to stimulate demand

New Capital Formation and Economic Paradigms

• Current economic paradigm relies on past savings to finance new capital formation, limiting those who are not rich
• Leads to a decrease in labor value as people compete with capital that replaces them

Shift from Past Savings to Future Savings

• Proposed shift from past savings to future savings to free economic growth from limitations of past savings
• Key to this shift is to move creditworthiness from the borrower to the investment

Creditworthiness and Insurance

• Traditional collateral is no longer required in the future savings paradigm
• Feasible project and good character are sufficient
• Insurance can be used to secure against risk, replacing traditional collateral with a new form of collateral

Binary Economics Paradigm

• Allows anyone to use future savings to finance new capital, regardless of wealth or social status
• Requires a creditworthy investment that can pay for itself, financed with the income it generates, and collateralized with Capital Credit Insurance

Benefits of the Binary Economics Paradigm

• Anyone can become an owner, regardless of their circumstances
• The economy can become balanced, with people consuming what they produce and producing what they consume
• Money power is democratized, allowing individuals to create and use money in the right way