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 10: True Preferences, Metapreferences, and Actual Preferences: A Socio-economic Model of Preference Formation

John F. Tomer

Subjects: economics and finance, behavioural and experimental economics


10. True preferences, metapreferences and actual preferences: a socioeconomic model of preference formation Desire and aversion, though powerful, are but habits. And we can train ourselves to have better habits. Epictetus, Manual for Living: A New Interpretation by Sharon Lebell INTRODUCTION Should government discourage cigarette smoking? What about advertising aimed at women and promoting dieting to become super slim? Mainstream economists have, with few exceptions, taken the position that governments ought not to intervene in matters relating to people’s subjective preferences. After all, in these economists’ view, the essence of rationality is choosing in line with one’s well-defined, stable wants (McPherson 1984: 237). Many would presumably agree with Tollison and Wagner (1992: 158) who argue that ‘individuals who are observed to make particular choices are necessarily maximizing their individual welfare.’ Further, these authors contend that cigarette smokers are entirely rational and not addicted, the cigarette smoking being entirely under their control (pp. 158–60). Accordingly, Tollison and Wagner argue strongly against any attempt to change smokers’ preferences and against the idea that there is anything ‘wrong’ about smoking. The socio-economic model of preference formation developed here is based on some radically different ideas concerning preferences and rationality, and thus leads to very different conclusions concerning the desirability and inviolability of people’s preferences. The model is a multiple utility or multiple self model that integrates economic insights with many noneconomic ones. It might legitimately be called a ‘New Age’ model because it brings to bear perspectives from humanistic...

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