Britain

Abstract

‘Social Overhead Capital’ is as much a term of everyday speech as it is a technical concept in economics. It arose in development economics and is useful for purposes such as describing the characteristics of poor countries rather than in the work of economic theorists. It refers to large and bulky items of capital like transport systems but it is not easy to define in a rigorous way. An early definition in Hirschman is still one of the most acceptable (1). SOC is defined in terms of four characteristics: it is capital formation in an area which is somehow ‘basic’ to a range of economic activities; it is usually carried out by public authorities or is regulated by government agencies; it is non-importable; and it is associated with technical indivisibilities and high capital output ratios. Hirschman suggests that a wide notion of SOC is defined by only the first three characteristics and that the addition of the fourth gives a ‘narrow’ concept, focusing attention on transport facilities and power generation and away from expenditures on things like health and education.