After a brief hiatus, we are returning to our series on “Why Economists Reject Binary Economics.” Unfortunately, the reasons the so-called experts refuse to give Binary Economics consideration do not improve with age. Binary Economics, however, continues to advance and refine its theories and applications and ages like wine, while so-called “mainstream economics” (i.e., Keynesian, Monetarist, and Austrian) continues to degenerate and ages like milk.
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| Limited Academic Influence |
In the five previous postings on this subject, we have looked at 1) Lack of Empirical and Econometric Support, 2) Heterodox and Non-Conventional Framework, 3) Criticism of Core Concepts, Particularly “Productiveness”, 4) Negative Reception by Prominent Economists, and 5) Perceived Policy Risks and Inflation Concerns.
Today’s reason — Limited Academic Influence and Institutional Support — is perhaps the least logical of all the excuses today’s so-called experts reject Binary Economics:
6. Limited Academic Influence and Institutional Support:
- Kelso was not a professional economist but a lawyer and investment banker, which may have contributed to his ideas being dismissed as those of an “outsider.” Academic economics often prioritizes contributions from within the discipline, and Kelso’s lack of formal economic training likely hindered his credibility.
- While Binary Economics has supporters, such as Robert Ashford and Norman Kurland, it has primarily been promoted through non-academic channels, like the Center for Economic and Social Justice (CESJ) and the Kelso Institute. These organizations lack the influence of major academic institutions, limiting the theory’s exposure in scholarly circles.
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| Sir William Petty |
Essentially, this translates into the so-called experts declaring that since they do not consider Binary Economics, Binary Economics is not worth considering. Since “Kelso was not a professional economist,” he didn’t have the credentials to know anything about economics. All Kelso had was the practical experience from dealing with real economics every day, which operate whether the procedures are consistent with academic theory or the practitioners have ever heard of Keynes, Fisher, or von Mises . . . or even other uncredentialed writers in economics like Petty, Smith, and Marx. (That’s Sir William Petty, by the way, who did the first work in the Quantity Theory of Money back in the 17th century.)
Modern mainstream economics is, in fact, a bit like Platonic philosophy, which attempts to fit reality into a mold determined by some ideal economic theory thought up by credentialed economists, regardless how contradictory or just plain wrong the ideal theory might be. It tends to go from the general to the particular, that is, from theory to practice, and then tries to force the results to fit the theory; they “first draw the graph, then plot the points.”
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| "Surely You're Joking, Mr. Feynman" |
Modern mainstream economics, in fact, goes by faith, and woe betide anyone like Kelso who dares speak against whatever unholy writ some credentialed mainstream economist or politician happens to accept at the moment or pitches whatever extravagant promise he or she thinks will get him or her elected — what Richard Feynman called “Cargo Cult Science” in reference to its prevalence in the physical and social sciences, although not specifically economics . . . although it applies there more than anywhere else.
Kelso, however, went the other way. Like Aristotle, he observed what was going on in the real world of economics and finance and fitted his theories to reality. If some part of his theory didn’t fit what was really going on in the world, he tossed it away rather than tried to explain it away, ignore it, or ridicule it as being the ravings of madmen.
This affected Kelso’s academic standing, ridicule or ignoring anything that didn’t get you a degree or a paycheck being standard practice in Academia. It hindered his credibility, as the AI essay noted. Truth may be great and mighty above all things, but it has an uphill struggle when it comes to Academia and politics, where expedience, not veritas, rules. The true motto of higher learning is not “TRUTH” (or “TRVTH”), but “SHOW ME THE MONEY.”
That creates a problem, because in the Just Third Way, money for financially feasible capital investment doesn’t exist until and unless the capital investment has been identified and is reasonably expected to pay for itself within a reasonable period of time. As Kelso realized and integrated into his proposal, commercial (or mercantile) and central banking were designed and intended to create money for projects that paid for themselves. When the new money was repaid out of future profits, it was supposed to be cancelled, having done its job, and thereby avoiding both inflation and deflation.
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| Not close, and no cigar |
Kelso’s whole practical approach and his theoretical framework, in fact, rely on a different and much older understanding of money than is used by today’s economists and politicians. Money is not itself valuable (although the vehicle used to convey or store money may be very valuable, such as pieces of gold and silver), but is the symbol of value and a way of measuring and storing value. As Kelso explained,
Money is not a part of the visible sector of the economy. People do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector. (Louis O. Kelso and Patricia Hetter, Two-Factor Theory: The Economics of Reality. New York: Random House, 1967, 54-55.)
These words of Kelso are anathema to academic economists and politicians, who use their control over money and credit to control the future and ensure the continuation of their own jobs and power. Academia has degenerated from a search for truth to a scramble for cash, while politics has shifted from the art of the possible to a theater of the absurd if it wasn’t so tragic and destructive.
So, yes, academic economists necessarily dismiss Kelso’s theory because he implicitly threatens their monopoly over what people are taught, while politicians reject his practice because it threatens their monopoly of power. This is why Kelso’s theory and practice have been promoted and taught through “non-academic channels.” Consequently, since “[t]hese organizations lack the influence of major academic institutions, . . . the theory’s exposure in scholarly circles” has been “limited” . . . to say the least.
We can therefore safely dismiss “Limited Academic Influence and Institutional Support” as a valid reason for rejecting Binary Economics, if only due to the very interested motives supporters of today’s mainstream economic theories have to continue supporting today’s mainstream economics.
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