Peoples’ happiness and overall satisfaction with life are closely associated
with numerous factors, which constitute assets for well-being. Of course, what
constitutes a good life is highly subjective, and the relative importance
accorded to different aspects of well-being varies for individuals, societies,
and generations. But on some elements most people could probably agree: Having
the ability and opportunity to shape one’s life—which increase with better
health, education, and material comfort—is certainly one of them. Having a
sense of self-worth is another, enhanced by social contact, inclusiveness, and
participation in society. So is enjoying physical security and basic civil and
political liberties. And so is appreciating the natural environment—breathing
fresh air, drinking clean water, living among an abundance of plants and
animals. Enhancing human well-being on a sustained basis requires that society
manage this portfolio of assets (see portfolio of assets). Broadly,
these assets consist of:
Human assets—the innate skills, talents, competencies, and abilities of
individuals, as well as the effects of education and health.
Natural assets—both renewable and nonrenewable. These assets have source
functions that enter as inputs to production and utility—forests, fisheries,
mineral ores, and such natural forces as air and sea currents. They also have
sink functions to accommodate the unusable outputs of production and
consumption—air, water and soil receiving human pollution and waste. More
fundamentally, nature performs critical life-support services on which the
well-being of all life depends. So far—despite all our technological
advances—we have not found a way to replace these services through manmade
alternatives (box 2.1).
Manmade assets—produced means of production, such as machinery, equipment,
buildings, and physical networks, as well as financial assets.
Knowledge assets—“codified knowledge,” which is easily transferable across
space and time (unlike tacit knowledge, which entails an individual’s
experience and learned judgment and thus cannot be easily transferred).
Social (or relational) assets—interpersonal networks and the understanding and
shared values that these give rise to—which facilitate cooperation within or
among groups.
Balancing interests is a key function of the ideal institution; the institution
will act to minimize the potential for conflict through forging agreements and
decisions and thus, avoiding stalemates.
Catalysts for change are factors that initialize or accelerate socio-economical
changes, or factors that create opportunities. For instance, structural
changes—urbanization, the demographic transition, the redistribution of
wealth—unleash dynamic forces and opportunities for that institutional change.
Information can empower people by giving them more voice in public services and
allowing greater transparency and accountability in the activities of
governments and firms. Knowledge can offset famine, reveal strategic threats
and opportunities, and show the links between biodiversity and coffee
production. And open public forums can balance interests and promote
consensus—assisting in monitoring and accountability in the short term,
shifting balances and priorities in the long.
1. Collective action requires trust, cooperation, knowledge, and leadership, at
all levels from local to global. Refers both to the process by which voluntary
institutions are created and maintained, and the groups that decide to act
together. The term "property" covers the range of institutions
governing access to a particular stream of benefits. Property regimes are
usually divided into three categories; state, common, and private.
2. Any scenario in which two or more parties share a common goal and pursue a
common means to attain that objective is a collective action.
In the process of choosing an appropriate policy measure, when the actual
course of action undertaken differs from the stated, ideal goal, the
institution is said to have a commitment problem.
Population growth rates are determined by the difference between fertility and
mortality rates. Developed countries often have low population growth rates, as
low fertility rates are nearly offset by the rate of mortality. In many
developing countries high fertility rates outpace mortality rates creating high
population growth rates. Demographic transition reflects the change in
population growth rates within a growing economy as individuals are given more
opportunities to choose.
The elite comprise a small group of people with a disproportionate amount of
public decision-making power. Under elite capture, the political environment
and decision-making systems are under the control of the elite, with high
barriers of entry for the rest of the population.
Any organism within an eco-system that neutralizes the impact of potentially
harmful byproducts of human activity is a sink. Environmental assets
functioning as sinks receive pollution and reduce it (ie. forests acting as CO2
sinks).
1. In contrast to a commitment problem (defined above), an execution of
solutions exists when the actual course of action taken by the organization in
question is consistent with the stated ideal policy measure.
2. For institutions - credibly following through on agreements, easing the
aversion to change.
1. Any benefit or forgone opportunity born by at least one person as a result
of another person’s action is an externality.
2. A situation in which the private costs or benefits to the producers or
purchasers of a good or service differs from the total social costs or benefits
entailed in its production and consumption. An externality exists whenever one
individual's actions affect the well-being of another individual -- whether for
the better or for the worse -- in ways that need not be paid for according to
the existing definition of property rights in the society.
3. An externality is a consequence not considered in analysis. An externality
that affects the interests of other groups of people or other decision makers
is referred to as a spillover. If the effects of an externality are
appreciable, it may have to be taken into account (internalized) in the
analysis. The term externality derives from economics, where externalities are
costs or benefits not taken into account in a transaction or system of
transactions. For example, the cost borne by others when an industry pollutes a
stream would be referred to as an externality.
1. The quality of person’s life can be defined by the increase in human,
natural, knowledge, and social assets enjoyed by the median individual.
2. Change in wealth, appropriately defined to include a broad set of assets, is
a good measure of prospects for well-being as it indicates a country’s ability
to sustain a consumption stream―which is what matters for
sustainability—not just the consumption flow at a particular time. In
principle, only if wealth (measured in shadow prices and excluding capital
gains) increases over time—that is, only if adjusted net savings is
positive—will intergenerational well-being rise.
In any society, the ownership of assets is not distributed evenly across the
population. Inequality refers to the amount of dispersion of that wealth across
the population.
1. Norms and rules governing behaviors, and thus society. The norms are
commonly called informal institutions, while the rules of the game are termed
formal institutions. A formal institution is any rule that governs economic
activity. The term sometimes applies to organizations, which may also influence
the way economic activity is conducted.
2. The organizations that create and implement the rules and institutional
functions.
Because institutions govern behavior, they are social assets (or liabilities,
when bad or weak). So are the elements of social capital, such as trust,
networks, and relations.
Many organizations have a tendency to be slow to react, and resist change. The
ideal institution will needs to have the ability to evolve and be flexible to
meet its role in fostering economic growth through effective management of
assets that it has a mandate to oversee.
Related to the notion of path dependence (see “Path dependency”), the
term “locked in” refers to a situation in which a poor institution is chosen,
which leads to sub-optimal outcomes and requires a relatively high cost to be
modified.
As opposed to traditional societies which tend to be closed exclusive and ruled
by custom, such a society gives economic and political freedom to individuals
that will provide the most opportunities to the greatest number of people.
An economic environment in which the public and the private sector work in
conjunction to promote an ideal socio-economic outcome, leading to the highest
well-being of the median individual.
The tendency to stay to a certain path, trend, technology, method or location,
even if more promising alternatives show up. A commonly cited example is the
QWERTY typewriter keyboard. This was designed in the 19th century to
space apart the most commonly used letters to slow down typing, to avoid
jamming keys. Today's electronic keyboards do not suffer from jamming, however,
and a better system, DSK, cuts down on typing time by 10 percent.
Unfortunately, society is committed to the old system, because it is too costly
to retrain all typists and retool all keyboard production everywhere.
Balancing interests is another key function of the ideal institution; the
institution should be attuned to its environment and ready to identify and
tackle potential issues.
An information storage and retrieval system that is ineffective or partially
effective in providing access to the information contained within in a timely
and adequate manner.
1. A collection of assets, whether they are human, natural, manmade, knowledge
or social is termed a portfolio (see “Assets for well-being”).
2. The capacity of any society to meet the “requirements” of individual
well-being depends on the level and quality of its assets—and on how it deploys
them. Portfolio of assets approach stipulates that different assets have
different characteristics that limit the extent to which they can substitute
for each other in production and in human well-being, and the effective
management of the portfolio is crucial to well-being.
A prisoner’s dilemma results from any social interaction in which individuals,
who could have gained from acting cooperatively, pursue what is deemed to be in
their respective self-interest, and as a result everyone is made worse off.
Also called collective goods. These are a very special class of goods which
cannot practically be withheld from one individual consumer without withholding
them from all (the "nonexcludability criterion") and for which the
marginal cost of an additional person consuming them, once they have been
produced, is zero (the "nonrivalrous consumption" criterion). The
classic example of a nearly pure public good is national defense: you cannot
defend the vulnerable border regions of a country from the ravages of foreign
invaders without also simultaneously defending everyone else who lives within
the borders.
Like the so-called “tragedy of the commons”, the race for property rights may
occur in situations where no one can claim ownership of some resource. If there
are no institutions that assign rights to use that resource, individuals may
then rush to extract as much benefit from it before everyone else, leading to
an accelerated depletion.
The ability to own property implies that any individual can determine how some
resource will be used and as a result they will make the best use of that
resource. In the context of land ownership the same principle holds true.
Pertaining, relating, or due to, connected with, etc., society as a natural or
ordinary condition of human life. In this use, social enters into a very large
number of collocations, many of which have the quality of set phrases, but have
not gained specialized meanings; examples are: social background, barrier,
capacity, climate, code, consciousness, contact, context, duty, fabric, grace,
group, hierarchy, justice, mix, morality, phenomenon, prejudice, problem,
question, reason, scale, sympathy, usefulness, virtue, welfare.
1. Social capital refers to the institutions, relationships, and norms that
shape the quality and quantity of a society's social interactions. Social
capital refers to those stocks of social trust, norms and networks that people
can draw upon to solve common problems. Networks of civic engagement, such as
neighborhood associations, sports clubs, and cooperatives, are an essential
form of social capital, and the denser these networks, the more likely that
members of a community will cooperate for mutual benefit.
2. The broadest and most encompassing view of social capital includes the
social and political environment that shapes social structure and enables norms
to develop. In addition to the largely informal, and often local, horizontal
and hierarchical relationships of the first two concepts, this view also
includes the more formalized institutional relationships and structures such as
government, the political regime, the rule of law, the court system, and civil
and political liberties. This focus on institutions draws on North (1990) and
Olson (1982), who have argued that such institutions have an important effect
on the rate and pattern of economic development.
This view not only accounts for the virtues and vices of social capital, and
the importance of forging ties within and across communities, but recognizes
that the capacity of various social groups to act in their interest depends
crucially on the support (or lack thereof) that they receive from the state as
well as the private sector. Similarly, the state depends on social stability
and widespread popular support. In short, economic and social development
thrives when representatives of the state, the corporate sector, and civil
society create forums in and through which they can identify and pursue common
goals.
Most ecosystems are defined spatially. For instance, much flora and fauna is
locally unique and adapts gradually to changes in local circumstances. Local
problems and stresses appear earliest whether in the form of local extinctions,
the range of many plants and animals has been reduced relative to their earlier
ranges, or in the form of soil, air, and water pollution.
Taxing activities generating negative externalities as if they were bearing the
full costs and foregone opportunities resulting from their own actions.
Any good that has the characteristic that one person’s consumption does not
impair anyone else’s consumption is called a public good. It is often assumed
that the market could not supply these goods because the private costs of
producing them exceed the private benefits.
Urbanization is the process whereby large, sometimes younger, segments of the
population move from rural areas move to urban areas, generally in the search
for better opportunities. This follows as cities have higher concentrations of
economic activity resulting from the lower costs of transacting.
As a political system opens up to allow access to more segments of the
population, those with an established presence are said to have vested
interests.
Having one’s voice is to have the ability to participate in a political process
by freely expressing what is and what is not in one’s interest. This is to be
contrasted with exit, another form of political expression, that involves
moving, often called voting with your feet.
Any policy that preserves the ecosystem’s natural assets while fostering
economic growth is called a win-win policy. Examples of such policies include
eliminating subsidies for energy inputs, pesticides, fertilizer, irrigation
water, logging, and ranching (perverse subsidies); taxing urban road emissions.
