Binary economics, also known as two-factor economics, is a theory of economics that endorses both private property and a free market but proposes significant reforms to the banking system. According to theories first proposed by Louis Kelso, widespread use of central bank-issued interest-free loans to fund employee-owned firms can finance economic growth whilst widening stock ownership in a way which binary economists believe will be non-inflationary. The term "binary" derived from its heterodox treatment of labor and capital (but not in the sense of binary opposition). Kelso claimed that in a truly free market wages would tend to fall over time, with all the benefits of technological progress accruing to capital owners. Overview Binary economics rejects the claim that neoclassical economics alone promotes a 'free market' which is free, fair and efficient. (e.g., as an interpretation of the classical First Fundamental Theorem of Welfare Economics). Binary economists believe freedom is only truly achieved if all individuals are able to acquire an independent economic base from capital holdings, and that the distribution of ownership rights can "deepen democracy". Binary economics argues financial savings prior to investment are not required on the basis that the present money supply is mostly created credit anyway. It argues that newly minted money invested on behalf of those without access to existing cash savings or collateral can be adequately repaid through the returns on those investments, which need not be inflationary if the economy is operating below capacity. 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. 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 (not in relation to the development and spreading of productive capacity). Conventional economics accounts for the observed time value of money, whereas binary economics does not. Background The theory behind Binary Economics was proposed by American lawyer Louis Kelso and philosopher Mortimer Adler in their book The Capitalist Manifesto (1958). The book's title could be seen as a Cold War reference in opposition to communism. Kelso and Adler elaborated on their proposals in The New Capitalists in 1961. Then Kelso worked with political scientist Patricia Hetter Kelso to further explain how capital