“Human Capital,”” Social Capital” and Mental Health

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“Human Capital,”” Social Capital” and Mental Health

Health economists refer to “human capital” and “social capital” as they

develop the economic case for increased spending on health in government

budgets. I asked Harvey Whiteford to explain these terms for general

readers.

                                                                       – Editor

While it is accepted that better health promotes human welfare, there is

also evidence that better health of the population results in economic

benefits. The arguments for this are relatively straightforward when the

elements which underpin capital theory and human productivity are

considered. Capital theory arbitrarily divides those things used to

produce goods or services into three groups – natural resources, human labor

and man-made goods. This last group was traditionally called “capital

goods” (or often just “capital”) and was defined as produced goods that

could be used as inputs for further production.

Over time natural resources and human labor began to be referred to as

capital as well. Human capital is used to refer to how educated and

healthy workers productively utilize other “capital” intputs. Thus we now

routinely recognize natural capital (soil, atmosphere, forests and water);

human capital (human productivity); and man- made or physical capital (for

example buildings, roads and computers).

In the last decade there has been a resurgence of interest in a fourth form

of capital – social capital. This has been referred to as the missing link

in economic development. The concept of “social capital” grew out of the

belief that cohesive and productive groups of individuals are more than just

the sum of their individual human capital.

While the term “social capital” has suffered from being used in a variety of

ways and for a variety of reasons, the concept appears to add a critical

element to the factors necessary to reduce poverty and promote sustainable

development. Economists have been interested in social capital because it

provides insights into community productivity and trade. Social networks

which possess more social capital tend to have higher productivity,

facilitated by improved coordination and cooperation, and reduced costs of

doing business.

The socioeconomic determinants of health have been well studied and there is

good evidence that more socially isolated individuals have poorer health and

more socially cohesive societies are healthier, with lower mortality.

Reducing the burden of mental illness and promoting mental health can lead

to an enhancement of the individual attributes needed for a person to assume

a productive social role. Good mental as well as physical health enhances

the competencies necessary for more constructive participation in society

and builds a community’s social capital.

                                                                               – Harvey Whiteford