Binary economics

Binary economics, also known as two-factor economics, is a proposed economics theory by Louis O. Kelso that suggests policy makers endorse a continued use of both private property and a free market but should also seek significant reforms to the banking system as a means of producing fairer economic growth.

Kelso principally theorized with this model that widespread use of central bank-issued, interest-free loans to fund employee-owned firms could simultaneously finance economic growth and widen ownership interests in company shares. In a 1977 seminar on Policies for Capital Diffusion through Expanded Equity Ownership, Lawrence Klein concluded expansion of credit under the plan would be non-inflationary "if the funds made available flow into investments that raise national productivity." The term "binary" in his case is derived from a perceived heterodox treatment of labor and capital (but not in the sense of binary opposition). Kelso claimed that with advancing technology capital becomes more important than physical labor and if income distribution is determined by market forces, owners will become richer while labor will find it more difficult to survive. He favored spreading capital ownership rather than redistributive policies.