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Abstract
The concept of capital has a number of different meanings. It is useful to differentiate between five kinds of capital: financial, natural, produced, human, and social. All are stocks that have the capacity to produce flows of economically desirable outputs. The maintenance of all five kinds of capital is essential for the sustainability of economic development. Financial capital facilitates economic production, though it is not itself productive, referring rather to a system of ownership or control of physical capital. Natural capital is made up of the resources and ecosystem services of the natural world. Produced capital consists of physical assets generated by applying human productive activities to natural capital and capable of providing a flow of goods or services. Human capital refers to the productive capacities of an individual, both inherited and acquired through education and training. Social capital, the most controversial and the hardest to measure, consists of a stock of trust, mutual understanding, shared values and socially held knowledge. In the course of economic history, the focus has shifted from material-intensive to information-intensive technologies. These technologies make it possible to economize simultaneously on the three classical factors of production: land, labor, and produced capital. Information technologies can be embodied (in physical capital) or disembodied, consisting of shared understandings and procedures (human and social capital). Sustainable development must maintain or increase all productive capital stocks, including natural capital, which is currently often depleted through economic production. The maintenance of stocks of human and social capital is equally important. Thus the traditional trio of essential economic activities - production, consumption, and distribution - must be supplemented with a fourth function, that of resource maintenance.
Details
Title Five Kinds of Capital: Useful Concepts for Sustainable Development
Author(s) Goodwin, Neva R.
Subject(s)
Issue Date 2003
Publication Type Working or Discussion Paper
DOI and Other Identifiers 10.22004/ag.econ.15595
Record Identifier https://ageconsearch.umn.edu/record/15595
PURL Identifier http://purl.umn.edu/15595
Language English
Total Pages 14
Series Statement Working Paper No. 03-07
Record Appears in Tufts University > Global Development and Environment Institute > Working Papers
Statistics
As an expert in sustainable development and the multidimensional nature of capital, I've delved deeply into the works of numerous scholars, including Neva R. Goodwin. Her 2003 paper titled "Five Kinds of Capital: Useful Concepts for Sustainable Development" is a seminal piece that outlines a comprehensive framework for understanding the various forms of capital essential for sustainable economic development.
Let's break down the five types of capital as elucidated in Goodwin's work:
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Financial Capital: This refers to the monetary resources available for investment in business ventures or other forms of economic production. While financial capital is not inherently productive on its own, it serves as a facilitator for economic activities by providing the means to acquire other forms of capital.
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Natural Capital: This encompasses the resources and ecosystem services provided by the natural environment. Natural capital includes everything from minerals and forests to clean air and water. It's crucial to recognize that economic activities often deplete natural capital, making its sustainable management essential for long-term well-being.
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Produced Capital: This type of capital consists of physical assets created through human activities applied to natural resources. Examples of produced capital include infrastructure, machinery, buildings, and other tangible assets that contribute to the production of goods and services.
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Human Capital: Human capital pertains to the skills, knowledge, and abilities possessed by individuals, which are acquired through education, training, and experience. It recognizes that people are not just laborers but also repositories of knowledge and expertise essential for innovation and productivity.
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Social Capital: Perhaps the most abstract yet equally vital form of capital, social capital refers to the relationships, trust, shared values, and communal understandings within a society or community. It encompasses the networks and norms that facilitate cooperation, collective action, and mutual support.
Goodwin emphasizes that sustainable development necessitates the maintenance or enhancement of all five forms of capital. Moreover, with the advent of information-intensive technologies, there's an increasing recognition of the importance of human and social capital, which are not only embodied in physical structures but also exist in shared understandings, norms, and relationships.
In essence, Goodwin's framework underscores the need to move beyond traditional economic paradigms focused solely on production, consumption, and distribution. A holistic approach to sustainable development must integrate resource maintenance, recognizing that the preservation and enhancement of all forms of capital are essential for long-term prosperity and well-being.
For those interested in delving deeper, I'd recommend accessing the full paper by Neva R. Goodwin to gain a more comprehensive understanding of these concepts and their implications for sustainable development.
