Table of Contents

Intangible Capital

Intangible Capital

Its Contribution to Economic Growth, Well-being and Rationality

John F. Tomer

Despite increasing research efforts, there is still much confusion regarding the nature and contribution of the most intangible forms of capital. This book develops a comprehensive and unifying conception of intangible capital in order to understand its role with respect to economic growth, well-being, and rationality. As the book illustrates, utilizing the intangible capital concept enables many new and important economic insights. Intangible capital is defined to include standard human capital, noncognitive human capital (including personal capital), social capital, and other intangible manifestations of human capacity. Understanding intangible capital is a key to realizing the full human potential of our economic systems.

Chapter 1: Introduction

John F. Tomer

Subjects: economics and finance, behavioural and experimental economics

Extract

In modern business practice, capital is distinguished into two . . . categories of assets, tangible and intangible. Thorstein Veblen 1919: 352–3 In the early days at least, this [intangible assets] is far and away the most important and consequential category of the community’s assets ibid, 325–6 INTRODUCTION Unfortunately, the economics profession has not done very much to develop the early insights of Thorstein Veblen. True, practically all economists (and other social scientists) accept the view that investment in things like education and training creates a human type of capital which yields returns to the people in whom it is embodied. But when it comes to the noncognitive or more intangible forms of human capital, economists generally do not accept that these intangible forms of capital are relevant to their research. The great recent interest of noneconomist social scientists in intangible capital, particularly social capital (SC), has, however, caused more than a few economists to pay attention. Nevertheless most mainstream economists who have bothered to consider SC remain skeptical of its importance. For example, while admitting the ‘plausibility that social networks can affect economic performance,’ Kenneth Arrow (2000: 3) doubts that the SC concept can be made ‘operational for the purposes of analysis and policy.’ Similarly, Robert Solow (2000: 6) thinks that SC writers ‘are trying to get at something difficult, complicated, and important,’ but he also believes they are trying ‘to gain conviction from a bad analogy.’ On the other hand, Joseph Stiglitz (2000: 59), while...