Improving the Standard of Living Through Investments in Intangible Capital

Abstract

When mentioning the sources of an economy’s productivity, economists' list typically includes tangible capital and human capital, at least standard human capital, the kind largely associated with education and training. But economists do not usually mention the more intangible forms of human capital. Generally, economists have been very slow to grasp the significance of the intangibles. It should be noted that in this paper the term intangible capital is an umbrella term used to denote all the human capacities embodied either in individuals or in human relationships. These individual capacities may be cognitive or noncognitive, and the relationships may be in organizations or outside organizations. This paper focuses on the more intangible of these capacities, the ones that have tended to be neglected by economists.This neglect of intangible capital has hampered economists ability to understand the key causes of important social problems. This paper explains how low or poor intangible capital is related to four social problems: 1) obesity, 2) chronic health problems, 3) addiction, and 4) poverty and inequality. It is argued that the solution to these social problems lies in part in investing in appropriate intangible capital. In sum, several types of targeted investments in intangible capital can be a very important way to resolve social problems, thereby raising the nation’s standard of living.