mm395: Blast from the Past! No. 24

May 29, 2008

MUDGE’s Musings

Still fighting to restore some normal computation to Casa Mudge. Meanwhile, we needs must blog daily.

There’s most read, and then there’s favorite. This is a post which yr (justifiably) humble svt is, regrettably, but not regretfully, not at all humble about.

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Blast from the Past!

A post we really, really loved to write, and read, and re-read…

From last summer, originally posted September 6, 2007, and originally titled “Our intangible riches”.

MUDGE’S Musings

Submitted in the spirit of: MUDGE takes well written good ideas where he finds them. And riffs from there. Hang on!

Oil, soil, copper, and forests are forms of wealth. So are factories, houses, and roads. reasononline_thumb4 But according to a 2005 study by the World Bank, such solid goods amount to only about 20 percent of the wealth of rich nations and 40 percent of the wealth of poor countries.

So what accounts for the majority? World Bank environmental economist Kirk Hamilton and his team in the bank’s environment department have found that most of humanity’s wealth isn’t made of physical stuff. It is intangible. In their extraordinary but vastly underappreciated report, Where Is The Wealth Of Nations?: Measuring Capital for the 21st Century, Hamilton’s team found that “human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries.”

The World Bank study defines natural capital as the sum of cropland, pastureland, forested areas, protected areas, and nonrenewable resources (including oil, natural gas, coal, and minerals). Produced capital is what most of us think of when we think of capital: machinery, equipment, structures (including infrastructure), and urban land. But that still left a lot of wealth to explain. “As soon as you say the issue is the wealth of nations and how wealth is managed, then you realize that if you were only talking about a portfolio of natural assets, if you were only talking about produced capital and natural assets, you’re missing a big chunk of the story,” Hamilton explains.

Intangible capital accounts for 77 percent of the wealth of nations!

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