I want to think a little about intangible forms of capital. If knowledge can be capital, it would seem to be intangible capital.

Paul Meyers defines capital as “something owned which provides ongoing services.” Alan Deardorff notes that it is “one of the main primary factors, the availability of which determines the productivity of labor, comparative advantage, and the pattern of international trade.” We tend to value capital investments in terms of the added income flows we can expect to realize utilizing the capital.

When I think of human capital, I tend to think of the knowledge, understanding and skills that are created, especially those created through education and training. Of course there are other aspects of human capital; investment in health services can result in improved physical and mental wellbeing with consequent enhancement of earnings.

Formal organizations (including enterprises) have intangible capital (as I mentioned in a previous posting). I have worked in several newly formed organizations, and my experience is that such organizations become more productive over time as work routines are established and as people learn to work better with one another; part of the effort of establishing routines and learning to work together then may be seen as an investment in organizational capital. Indeed organizations seem to spend a lot of time in reengineering, reorganizing, and other efforts that can be seen as investing in intangible organizational capital. Moreover, there is a consulting industry focusing on organizational learning, organizational development, building organizational capacity, etc. – services that allow organizations to invest in developing intangible organizational capital.

My colleagues at the World Bank and similar organizations sometimes talk about institution building, including investing in the development or improvement of markets. Some markets of course have physical capital – as the New York Stock Market is housed in expensive real estate, and operates via expensive ICT systems. There has also been a lot of investment in human capital, such as in the formal and continuing education about the market of people who buy and sell shares, brokers, analysts, reporters reporting on the market, etc. The market also depends on a lot of tacit knowledge, about where to go and what to do in investing.

One could go on to discuss the intangible capital involved in other institutions such as local communities, professional communities, clusters of businesses, chambers of commerce, trade associations, and other communities of practice.

The term Social Capital is described by PovertyNet at the World Bank as referring to “the norms and networks that enable collective action.” I would suggest that some of the intangible capital in people, organizations, markets, and other institutions would fit within this definition. Indeed, I wonder if the Bank’s concept is too restrictive, in that only a part of the knowledge embodied in these institutions is in the form of norms and networks. It seems to me that a key issue in Knowledge for Development programs should be in adding knowledge to institutions and thus building social capital.