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 6: Personal Capital and Emotional Intelligence: An Increasingly Important Intangible Source of Economic Growth

John F. Tomer

Subjects: economics and finance, behavioural and experimental economics


Analyses done by dozens of different experts in close to five hundred corporations, government agencies, and nonprofit organizations worldwide have arrived independently at remarkably similar conclusions . . . Their conclusions all point to the paramount place of emotional intelligence in excellence on the job – in virtually any job. Goleman 1998: 5 The purpose of this chapter is to provide an explanation for a part of economic growth that has heretofore been unexplained. In seeking to explain economic growth, economists have naturally turned first to the most tangible factors, physical capital, natural resources and labor. Increasingly, however, they have turned to intangible or less tangible considerations like standard human capital. Because a significant part of economic growth still remains unexplained, it is necessary and important to explore the role of the most intangible factors, those of a social and psychological nature. That is why this chapter is concerned with personal capital formation and its contribution to explaining the previously unexplained growth in national output. This chapter focuses largely on one type of personal capital formation, that due to improvement in emotional intelligence. ECONOMIC GROWTH AND INTANGIBLE CAPITAL FORMATION Let’s start with the standard neoclassical approach to economic growth in which the economy is viewed as a production function. Using a version of this theory, Edward Denison (for example, 1962 and 1974) and other economists have used ‘growth accounting’ methods to estimate the sources of economic growth. In particular, they have used data on the growth of certain inputs and outputs...

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