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

Health economists refer to “human capital” and “social capital” as theydevelop the economic case for increased spending on health in governmentbudgets. I asked Harvey Whiteford to explain these terms for generalreaders.                                                                       – Editor

While it is accepted that better health promotes human welfare, there isalso evidence that better health of the population results in economicbenefits. The arguments for this are relatively straightforward when theelements which underpin capital theory and human productivity areconsidered. Capital theory arbitrarily divides those things used toproduce goods or services into three groups – natural resources, human laborand man-made goods. This last group was traditionally called “capitalgoods” (or often just “capital”) and was defined as produced goods thatcould be used as inputs for further production.

Over time natural resources and human labor began to be referred to ascapital as well. Human capital is used to refer to how educated andhealthy workers productively utilize other “capital” intputs. Thus we nowroutinely recognize natural capital (soil, atmosphere, forests and water);human capital (human productivity); and man- made or physical capital (forexample buildings, roads and computers).

In the last decade there has been a resurgence of interest in a fourth formof capital – social capital. This has been referred to as the missing linkin economic development. The concept of “social capital” grew out of thebelief that cohesive and productive groups of individuals are more than justthe sum of their individual human capital.

While the term “social capital” has suffered from being used in a variety ofways and for a variety of reasons, the concept appears to add a criticalelement to the factors necessary to reduce poverty and promote sustainabledevelopment. Economists have been interested in social capital because itprovides insights into community productivity and trade. Social networkswhich possess more social capital tend to have higher productivity,facilitated by improved coordination and cooperation, and reduced costs ofdoing business.

The socioeconomic determinants of health have been well studied and there isgood evidence that more socially isolated individuals have poorer health andmore socially cohesive societies are healthier, with lower mortality.Reducing the burden of mental illness and promoting mental health can leadto an enhancement of the individual attributes needed for a person to assumea productive social role. Good mental as well as physical health enhancesthe competencies necessary for more constructive participation in societyand builds a community’s social capital.

                                                                               – Harvey Whiteford