Individual capital
Encyclopedia
Individual capital
, also known as human capital, comprises inalienable or personal traits of persons, tied to their bodies and available only through their own free will
, such as skill
, creativity
, enterprise
, courage
, capacity for moral example
, non-communicable wisdom
, invention
or empathy
, non-transferable personal trust and leadership
.
It was recognized as an intangible quality of persons in economics
back to at least Adam Smith
. He distinguished it (as "enterprise
") from labour which can be coerced and is usually seen as strictly imitative (learned or transmitted, via such means as apprenticeship
).
Marxist economics refers instead to "an individual's social capital
- individuals are sources neither of creativity and innovation, nor management skill. A problem with that analysis is that it simply cannot explain the substitution problem and lack of demand that occurs when, for instance, an understudy takes on a leading role, or a second author takes over writing a popular book series. At the very least there must be some conditional, if not firm-specific then "class specific"
, special ability to command premiums for outstanding personal performance.
Neoclassical economics
by contrast refers to "the individual in whom the human capital is ... embedded", which implies a strong association of the individual with the instructional capital
they learn from, with little or no social capital
influence. This is orthogonal to the Marxist view, but not necessarily opposed.
Human development theory
reflects both distinctions: it sees labour as the yield of individual capital in the same way that neoclassical macro-economics sees financial capital
as the yield of the looser idea of human capital
. But the rest problem and social welfare function
selection, as well as the subjective factors in behavioral finance
, has led to a closer analysis of factors of production
. In effect, the financial architecture is no longer trusted as an arbiter of the value of life
as it was in neoclassical economics
. Money
is not seen as values
-neutral, but as embodying a set of larger social choices about money supply
rules, made by measuring well-being of whole populations.
Fusions of terminology are common. Sociological analysts refer to "individual-level elements of social capital" or "an individual's social capital" or just "individual social capital" while economic analysts often use the phrase firm-specific human capital. In either case the clearly includes individual capital but also some "activity-", "community-" or "firm-specific" social capital
(community trust) and instructional capital
(shareable knowledge or skills). This is easy to measure: its yield is your salary in your current job.
To the degree this is consistent if you take other work nearby, this opens the questions of what is not "firm-specific" and whether a nation is just a bigger "firm": Some analyses see political capital
, or just "influence" or "trust of professionals" as a full style of capital of its own. Some ethicists, most clearly Jane Jacobs
, see this as simple corruption
. Nonetheless, corruption clearly has a cash value, involves some creativity to arrange, and is a decision factor. It is a skill like any other.
Perhaps because of this, not all theorists recognize individual capital as being as essential as labour, or distinct from social or political influence, or from instructional capacity. These theorists often refer to "intellectual capital
", which more properly describes a debate or locus of complexity that arises when individuals take key instructional roles. Some refer to celebrity
as another fusion, when individuals take key social roles.
Those who differentiate individual capital tend to see it as something that one can invest in, directly, and see growth, directly. For individual skill, even skill at a highly imitative enterprise, like sports or mastery of a musical instrument
, this is very often quite measurable. Many enterprises, for instance, a music conservatory or circus school or creative writing
coach, are clearly making a living on the identification and (somewhat) measurable enhancement of the individual.
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
, also known as human capital, comprises inalienable or personal traits of persons, tied to their bodies and available only through their own free will
Free will
"To make my own decisions whether I am successful or not due to uncontrollable forces" -Troy MorrisonA pragmatic definition of free willFree will is the ability of agents to make choices free from certain kinds of constraints. The existence of free will and its exact nature and definition have long...
, such as skill
Skill
A skill is the learned capacity to carry out pre-determined results often with the minimum outlay of time, energy, or both. Skills can often be divided into domain-general and domain-specific skills...
, creativity
Creativity
Creativity refers to the phenomenon whereby a person creates something new that has some kind of value. What counts as "new" may be in reference to the individual creator, or to the society or domain within which the novelty occurs...
, enterprise
Entrepreneur
An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...
, courage
Courage
Courage is the ability to confront fear, pain, danger, uncertainty, or intimidation...
, capacity for moral example
Moral example
Moral example is trust in the moral core of another, a role model. It was cited by Confucius, Muhammad, Mohandas Gandhi and other important philosophers and theologians as the prime duty of a ruler - including the head of a family or the owner of a business....
, non-communicable wisdom
Wisdom
Wisdom is a deep understanding and realization of people, things, events or situations, resulting in the ability to apply perceptions, judgements and actions in keeping with this understanding. It often requires control of one's emotional reactions so that universal principles, reason and...
, invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
or empathy
Empathy
Empathy is the capacity to recognize and, to some extent, share feelings that are being experienced by another sapient or semi-sapient being. Someone may need to have a certain amount of empathy before they are able to feel compassion. The English word was coined in 1909 by E.B...
, non-transferable personal trust and leadership
Leadership
Leadership has been described as the “process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task". Other in-depth definitions of leadership have also emerged.-Theories:...
.
It was recognized as an intangible quality of persons in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
back to at least Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
. He distinguished it (as "enterprise
Entrepreneur
An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...
") from labour which can be coerced and is usually seen as strictly imitative (learned or transmitted, via such means as apprenticeship
Apprenticeship
Apprenticeship is a system of training a new generation of practitioners of a skill. Apprentices or protégés build their careers from apprenticeships...
).
Marxist economics refers instead to "an individual's social capital
Social capital
Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...
- individuals are sources neither of creativity and innovation, nor management skill. A problem with that analysis is that it simply cannot explain the substitution problem and lack of demand that occurs when, for instance, an understudy takes on a leading role, or a second author takes over writing a popular book series. At the very least there must be some conditional, if not firm-specific then "class specific"
Class struggle
Class struggle is the active expression of a class conflict looked at from any kind of socialist perspective. Karl Marx and Friedrich Engels wrote "The [written] history of all hitherto existing society is the history of class struggle"....
, special ability to command premiums for outstanding personal performance.
Neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
by contrast refers to "the individual in whom the human capital is ... embedded", which implies a strong association of the individual with the instructional capital
Instructional capital
Instructional capital is a term used in educational administration after the 1960s, to reflect capital resulting from investment in producing learning materials....
they learn from, with little or no social capital
Social capital
Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...
influence. This is orthogonal to the Marxist view, but not necessarily opposed.
Human development theory
Human development theory
Human development theory is a theory that merges older ideas from ecological economics, sustainable development, welfare economics, and feminist economics. It seeks to avoid the overt normative politics of most so-called "green economics" by justifying its theses strictly in ecology, economics and...
reflects both distinctions: it sees labour as the yield of individual capital in the same way that neoclassical macro-economics sees financial capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
as the yield of the looser idea of human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
. But the rest problem and social welfare function
Social welfare function
In economics, a social welfare function is a real-valued function that ranks conceivable social states from lowest to highest. Inputs of the function include any variables considered to affect the economic welfare of a society...
selection, as well as the subjective factors in behavioral finance
Behavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
, has led to a closer analysis of factors of production
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
. In effect, the financial architecture is no longer trusted as an arbiter of the value of life
Value of life
The potency of life is an economic value assigned to life in general, or to specific living organisms. In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances. As such, it is a statistical term, the cost of reducing the number of deaths by...
as it was in neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
. Money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
is not seen as values
Value (ethics)
In ethics, value is a property of objects, including physical objects as well as abstract objects , representing their degree of importance....
-neutral, but as embodying a set of larger social choices about money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
rules, made by measuring well-being of whole populations.
Fusions of terminology are common. Sociological analysts refer to "individual-level elements of social capital" or "an individual's social capital" or just "individual social capital" while economic analysts often use the phrase firm-specific human capital. In either case the clearly includes individual capital but also some "activity-", "community-" or "firm-specific" social capital
Social capital
Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...
(community trust) and instructional capital
Instructional capital
Instructional capital is a term used in educational administration after the 1960s, to reflect capital resulting from investment in producing learning materials....
(shareable knowledge or skills). This is easy to measure: its yield is your salary in your current job.
To the degree this is consistent if you take other work nearby, this opens the questions of what is not "firm-specific" and whether a nation is just a bigger "firm": Some analyses see political capital
Political capital
Political capital is primarily based on a public figure's favorable image among the populace and among other important factors in or out of the government. Political capital is essentially the opinion of another person, group of people, or nation about you, your organization, or your government...
, or just "influence" or "trust of professionals" as a full style of capital of its own. Some ethicists, most clearly Jane Jacobs
Jane Jacobs
Jane Jacobs, was an American-Canadian writer and activist with primary interest in communities and urban planning and decay. She is best known for The Death and Life of Great American Cities , a powerful critique of the urban renewal policies of the 1950s in the United States...
, see this as simple corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
. Nonetheless, corruption clearly has a cash value, involves some creativity to arrange, and is a decision factor. It is a skill like any other.
Perhaps because of this, not all theorists recognize individual capital as being as essential as labour, or distinct from social or political influence, or from instructional capacity. These theorists often refer to "intellectual capital
Intellectual capital
The value of an enterprise is made of physical assets, various financial assets and, finally, intangible assets, i.e., intellectual capital . The term intellectual capital conventionally refers to the difference in value between tangible assets and market value. ....
", which more properly describes a debate or locus of complexity that arises when individuals take key instructional roles. Some refer to celebrity
Celebrity
A celebrity, also referred to as a celeb in popular culture, is a person who has a prominent profile and commands a great degree of public fascination and influence in day-to-day media...
as another fusion, when individuals take key social roles.
Those who differentiate individual capital tend to see it as something that one can invest in, directly, and see growth, directly. For individual skill, even skill at a highly imitative enterprise, like sports or mastery of a musical instrument
Musical instrument
A musical instrument is a device created or adapted for the purpose of making musical sounds. In principle, any object that produces sound can serve as a musical instrument—it is through purpose that the object becomes a musical instrument. The history of musical instruments dates back to the...
, this is very often quite measurable. Many enterprises, for instance, a music conservatory or circus school or creative writing
Creative writing
Creative writing is considered to be any writing, fiction, poetry, or non-fiction, that goes outside the bounds of normal professional, journalistic, academic, and technical forms of literature. Works which fall into this category include novels, epics, short stories, and poems...
coach, are clearly making a living on the identification and (somewhat) measurable enhancement of the individual.
External links
- Capital: Volume Two
- Capital: Volume Three
- Proposals for the measurement of individual social capital
- "individual-level elements of social capital"
- "an individual's social capital"
- intellectual capital accounts - "individual capital and structural capital ... described to explain the future profitability and growth of the company"