Individual capital

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Individual capital, also known as human capital, comprises inalienable or personal traits of persons, tied to their bodies and available only through their own free will, such as skill, creativity, enterprise, courage, capacity for moral example, non-communicable wisdom, invention or empathy, non-transferable personal trust and leadership.

It was recognized as an intangible quality of persons in economics back to at least Adam Smith. He distinguished it (as "enterprise") from labour (economics) which can be coerced and is usually seen as strictly imitative (learned or transmitted, via such means as apprenticeship).

Marxist economics refers instead to "an individual's social capital - individuals are sources neither of creativity and innovation, nor management skill. A problem with that analysis is that it simply cannot explain the substitution problem and lack of demand that occurs when, for instance, an understudy takes on a leading role, or a second author takes over writing a popular book series. At the very least there must be some conditional, if not firm-specific then "class specific", special ability to command premiums for outstanding personal performance.

Neoclassical economics by contrast refers to "the individual in whom the human capital is ... embedded", which implies a strong association of the individual with the instructional capital they learn from, with little or no social capital influence. This is orthogonal to the Marxist view, but not necessarily opposed.

Human development theory reflects both distinctions: it sees labour as the yield of individual capital in the same way that neoclassical macro-economics sees financial capital as the yield of the looser idea of human capital. But the rest problem and social welfare function selection, as well as the subjective factors in behavioral finance, has led to a closer analysis of factors of production. In effect, the financial architecture is no longer trusted as an arbiter of the value of life as it was in neoclassical economics. Money is not seen as values-neutral, but as embodying a set of larger social choices about money supply rules, made by measuring well-being of whole populations.

Fusions of terminology are common. Sociological analysts refer to "individual-level elements of social capital" or "an individual's social capital" or just "individual social capital" while economic analysts often use the phrase firm-specific human capital. In either case the clearly includes individual capital but also some "activity-", "community-" or "firm-specific" social capital (community trust) and instructional capital (shareable knowledge or skills). This is easy to measure: its yield is your salary in your current job.

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