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How Wealthy is Your Nation?

Jul 5, 2012 • Behavioral Economics, Developing Economies, Economic Debates, Education, Environment, Government, Labor, Macroeconomic Measurement, Thinking Economically, Uncategorized • 222 Views    No Comments

When someone asks about your wealth, don’t you consider more than your income?

A new UN report explains where countries might do the same thing.

The report suggests that we focus more on a country’s land and capital assets. By land, they mean natural resources like forests, minerals and land. Dividing capital into its 2 components, they look at physical and human capital. Physical capital takes us to such structures and equipment as our roads and machinery. Somewhat intangible, human capital refers to facts about the learning people gather that enables them to become more productive. For 17 of the 20 countries in the UN study–all except Russia, Nigeria and Saudi Arabia, human capital is a top number.

The Productive Base

Human  Capital Physical Capital Land (Natural Capital)
Germany 67% 25% 8%
France 75% 24% 1%
Great Britain  90% 9% 1%
Japan 73% 26% 1%
USA 78% 16% 7%
Norway 61% 25% 14%

From: Inclusive Wealth Report 2012, p. 40.

Although not the focus of the report, an insight from economist Michael Mandel came to mind. He said that what we measure shapes our policies and priorities. If, in addition to GDP, we anxiously awaited a land, labor, capital asset report how might legislation be affected?

You might want to look at the UN Report for their long list of variables for each of the 3 asset categories (p. 31).

Quite a tome at 339 pages, the UN Report takes readers to sustainability issues after looking at wealth. In a detailed article, the Economist summarizes the report.

 

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