Individual capital

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Individual capital , the economic view of talent, 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.

In economics, capital consists of an asset that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a caveman who can use it as a hunting instrument, while roads are capital for inhabitants of a city.

An aptitude is a component of a competence to do a certain kind of work at a certain level. Outstanding aptitude can be considered "talent". An aptitude may be physical or mental. Aptitude is inborn potential to do certain kinds of work whether developed or undeveloped. Ability is developed knowledge, understanding, learned or acquired abilities (skills) or attitude. The innate nature of aptitude is in contrast to skills and achievement, which represent knowledge or ability that is gained through learning.

Free will ability of agents to make choices free from certain kinds of constraints

Free will is the ability to choose between different possible courses of action unimpeded.

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As recognized in theories of economics

Individual talent and initiative 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).

Economics Social science that analyzes the production, distribution, and consumption of goods and services

Economics is the social science that studies the production, distribution, and consumption of goods and services.

Adam Smith 18th-century Scottish moral philosopher and political economist

Adam Smith was a Scottish economist, philosopher and author as well as a moral philosopher, a pioneer of political economy and a key figure during the Scottish Enlightenment, also known as ''The Father of Economics''. Smith wrote two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. In his work, Adam Smith introduced his theory of absolute advantage.

Apprenticeship System of employment

An apprenticeship is a system of training a new generation of practitioners of a trade or profession with on-the-job training and often some accompanying study. Apprenticeship also enables practitioners to gain a license to practice in a regulated profession. Most of their training is done while working for an employer who helps the apprentices learn their trade or profession, in exchange for their continued labor for an agreed period after they have achieved measurable competencies. Apprenticeships typically last 3 to 7 years. People who successfully complete an apprenticeship reach the "journeyman" or professional certification level of competence.

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.

Social capital Concept

Social capital broadly refers to those factors of effectively functioning social groups that include such things as interpersonal relationships, a shared sense of identity, a shared understanding, shared norms, shared values, trust, cooperation, and reciprocity. However, the many views of this complex subject make a single definition difficult.

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.

Neoclassical economics is an approach to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand. This determination is often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production, in accordance with rational choice theory, a theory that has come under considerable question in recent years.

Instructional capital is a term used in educational administration after the 1960s, to reflect capital resulting from investment in producing learning materials.

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.

Financial capital is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based, i.e. retail, corporate, investment banking, etc.

Human capital is the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. Human capital theory is closely associated with the study of human resources management as found in the practice of business administration and macroeconomics. The original idea of human capital can be traced back at least to Adam Smith in the 18th century. The modern theory was popularized by Gary Becker, an economist and Nobel Laureate from the University of Chicago, Jacob Mincer, and Theodore Schultz. As a result of his conceptualization and modeling work using Human Capital as a key factor, the Nobel Prize for Economics, 2018, was awarded (jointly) to Paul Romer who founded the modern innovation-driven approach to understanding economic growth.

In welfare economics, a social welfare function is a function that ranks social states as less desirable, more desirable, or indifferent for every possible pair of social states. Inputs of the function include any variables considered to affect the economic welfare of a society. In using welfare measures of persons in the society as inputs, the social welfare function is individualistic in form. One use of a social welfare function is to represent prospective patterns of collective choice as to alternative social states. The social welfare function provides the government with a simple guideline for achieving the optimal distribution of income.

Versus "human", "firm-specific", "individual social"

While conflated in many analyses with human capital, the latter term includes social capital (human relationships) and instructional capital (abstract texts and training materials and so on) that are not tied to any one person, do not die with them or leave employment with them, and therefore cannot be equated with talent alone.[ citation needed ] In intangibles measurement, value creation and value reporting metrics require all assets with such different characteristics to be categorized as different capital assets, so the more exact reference to the individual person is preferred.

Intellectual capital is the intangible value of a business, covering its people, the value relating to its relationships, and everything that is left when the employees go home, of which intellectual property (IP) is but one component. It is the sum of everything everybody in a company knows that gives it a competitive edge. The term is used in academia in an attempt to account for the value of intangible assets not listed explicitly on a company's balance sheets. On a national level intellectual capital refers to national intangible capital, NIC.
A second meaning that is used in academia and was adopted in large corporations is focused on the recycling of knowledge via knowledge management and intellectual capital management (ICM). Creating, shaping and updating the stock of intellectual capital requires the formulation of a strategic vision, which blends together all three dimensions of intellectual capital within the organisational context through exploration, exploitation, measurement, and disclosure. Intellectual capital is used in the context of assessing the wealth of organizations. A metric for the value of intellectual capital is the amount by which the enterprise value of a firm exceeds the value of its tangible assets. Directly visible on corporate books is capital embodied in its physical assets and financial capital; however all three make up the value of an enterprise. Measuring the real value and the total performance of intellectual capital's components is a critical part of running a company in the knowledge economy and Information Age. Understanding the intellectual capital in an enterprise allows leveraging of its intellectual assets. For a corporation, the result will optimize its stock price.

A capital asset is defined to include property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating. Thus, land and building, plant and machinery, motorcar, furniture, jewellery, route permits, goodwill, tenancy rights, patents, trademarks, shares, debentures, securities, units, mutual funds, zero-coupon bonds etc. are capital assets.

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.

Versus "intellectual capital"

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.

However, a great many celebrities are clearly not "intellectual" achievers nor notable for any cognitive or analytic powers, e.g. Kim Kardashian, professional sports figures or other athletes. While they may through sheer exposure become involved in causes or controversies (as Paris Hilton did in the US presidential election, 2008) it's clearly not correct to label all individually unique talent or economic value as being an "intellectual" asset.

This failure to distinguish individual's objectively observed economic value (the power to promote or publicize products, draw attention to causes, etc.) from the "intellectual" powers is probably an elitist bias. Clearly, there are some individuals, including non-humans such as a racehorse, which have economic value unique to their individual body and being that cannot be captured or defined as an "intellectual" asset nor as a set of "social" relationships (because horses do not socialize in the sense humans do). Where slavery exists or has existed, there is clearly a value put on living bodies separate from their instructional or social selves.

Thus for analyzing historical or criminal economic activities, or even professional sports, the instructional capital vs. individual capital vs. social capital distinction is essential.

Investment

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.

Related Research Articles

In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, finished goods and services. The utilized amounts of the various inputs determine the quantity of output according to the relationship called the production function. There are three basic resources or factors of production: land, labor, and capital. The factors are also frequently labeled "producer goods or services" to distinguish them from the goods or services purchased by consumers, which are frequently labeled "consumer goods".

Liane Gabora is a professor of psychology at the University of British Columbia - Okanagan. She is best known for her theory of the "Origin of the modern mind through conceptual closure," which built on her earlier work on "Autocatalytic closure in a cognitive system: A tentative scenario for the origin of culture." Her recent writing on Honing Theory is adding new direction to the considerable work published on theories of creativity.

A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

Equity (finance) difference between the value of the assets/interest and the cost of the liabilities of something owned

In accounting, equity is the difference between the value of the assets and the value of the liabilities of something owned. It is governed by the following equation:

Productivism or growthism is the belief that measurable productivity and growth are the purpose of human organization, and that "more production is necessarily good". Critiques of productivism center primarily on the limits to growth posed by a finite planet and extend into discussions of human procreation, the work ethic, and even alternative energy production.

Wealth abundance of value

Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating old English word weal, which is from an Indo-European word stem. A community, region or country that possesses an abundance of such possessions or resources to the benefit of the common good is known as wealthy.

An intangible asset is an asset that lacks physical substance. It is defined in opposition to physical assets such as machinery and buildings. An intangible asset is usually very hard to evaluate. Patents, copyrights, franchises, goodwill, trademarks, and trade names. The general interpretation also includes software and other intangible computer based assets are all examples of intangible assets. Intangible assets generally—though not necessarily—suffer from typical market failures of non-rivalry and non-excludability.

Valuation (finance) process of estimating what something is worth, used in the finance industry

In finance, valuation is the process of determining the present value (PV) of an asset. Valuations can be done on assets or on liabilities. Valuations are needed for many reasons such as investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability, and in litigation.

Productive and unproductive labour are concepts that were used in classical political economy mainly in the 18th and 19th centuries, which survive today to some extent in modern management discussions, economic sociology and Marxist or Marxian economic analysis. The concepts strongly influenced the construction of national accounts in the Soviet Union and other Soviet-type societies.

Value network analysis (VNA) is a methodology for understanding, using, visualizing, optimizing internal and external value networks and complex economic ecosystems. The methods include visualizing sets of relationships from a dynamic whole systems perspective. Robust network analysis approaches are used for understanding value conversion of financial and non-financial assets, such as intellectual capital, into other forms of value.

Intangible Asset Finance is the branch of finance that deals with intangible assets such as patents and reputation. Like other areas of finance, intangible asset finance is concerned with the interdependence of value, risk, and time.

Asset economic resource, from which future economic benefits are expected

In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent value of ownership that can be converted into cash. The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.

The following outline is provided as an overview of and topical guide to economics:

Neo-classical economics has come under critique on the basis of its core ideologies, assumptions, and other matters.

Paper wealth means wealth as measured by monetary value, as reflected in the price of assets – how much money one's assets could be sold for. Paper wealth is contrasted with real wealth, which refers to one's actual physical assets.

Organizational capital is the value to an enterprise which is derived from organization philosophy and systems which leverage the organization’s capability in delivering goods or services.

The Indigo Era, or "Indigo economies", is a concept first publicized in early 2016 by international businessman Mikhail Fridman, the co-founder of LetterOne, an international investment business. He used the term to describe what he views as an emerging new era of economies and economics based on ideas, innovation, and creativity, which he sees as replacing economies which are based on the possession of natural resources. The word "indigo" was initially chosen based on the term indigo children, which has been used to describe people with unusual and innovative abilities.