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Ron Bailey writes in Reason about a new World Bank report on Where is the Wealth of Nations?: Measuring Capital for the 21st Century. Bailey says:
Intangible capital encompasses raw labor; human capital, which includes the sum of the knowledge, skills, and know-how possessed by population; as well as the level of trust in a society and the quality of its formal and informal social institutions. So what counts?
80 percent of the wealth of rich countries consists of intangible capital. "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity," argues the World Bank study.
As noted above, 90 percent of intangible capital is accounted for by years of schooling and the rule of law. On average, the rule of law explains 57 percent of countries' intangible capital while schooling accounts for 36 percent. The World Bank has devised a rule-of-law index that measures the extent to which people have confidence in and abide by the rules of their society. An economy with a very efficient judicial system, clear property rights, and an effective government will produce higher total wealth.
posted by James DeLong @ 10:12 AM | General
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