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
||Land (Natural Capital)
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.
The UN says that the problem is 1 billion hungry people. Columbia University scholar Jeffrey Sachs explains that the solution is foreign aid that attacks the “poverty trap.” Then, markets can develop and people can become more productive. By contrast, NYU scholar William Easterly says that aid is actually the problem. With free markets and the right incentives, success comes when people figure out their own solutions.
This Foreign Policy article on world hunger presents the debate and then the work of its authors, 2 scholars from MIT. Introducing people from Indonesia and India, they illustrate the complexities of world hunger. The discuss calories and productivity, the impact of pregnant women taking iodide pills and working men consuming iron supplements. They ask why people might choose tastier food rather than a healthier diet of eggs and bananas.
Here you can see UN graphs on hunger around the world. You might want to look at this Foreign Policy article and this article for some good discussion.
The Economic Lesson
How are world hunger and the British coastline similar? Mathematician Benoit Mandelbrot could tell us. Dr. Mandelbrot was the father of fractal geometry and the idea that the closer you look, the more you see. From a distance, the British coastline will appear straight. However, looking closer and closer increasingly reveals indents and zigzags. Consequently, Dr. Mandelbrot believed that it was actually much longer and even infinite. The significance? Something we might think is simple is really complex.
An Economic Question: Pondering how to diminish world hunger, consider the following from Duke University behavioral economist Dan Ariely. “…So we either simplify the problem and offer a solution, or embrace the complexity and do nothing.”