Capital Dr Will Harvey Structure of Lecture • Fixed and circulating capital • Financial capital • Human capital • Social capital • Cultural capital • Conclusions Fixed and Circulating Capital • In his Wealth of Nations book, Adam Smith distinguished between: - fixed capital: a portion of the total capital that is invested in fixed assets like buildings and vehicles e.g. bricks in a house - circulating capital items that are used up in the process of creating other goods or services e.g. petrol in a car Factors of Production • In classical economics, there are three factors of production: 1. Capital – can be used in the production of other goods. 2. Land – naturally occurring resources. 3. Labour – measure of the work done by humans. • In neoclassical economics, capital was also considered a ‘stock’, meaning that its value could be estimated at a point in time. Factors of Production Economic and Financial Capital • Economic capital is wealth either inherited or generated from interactions between individuals and the economy. • Financial capital represents obligations and is liquidated as money for trade, and owned by legal entities. • It is in the form of capital assets and traded in financial markets. • Its market value is based on the perception by the market of its expected worth as well as the risk entailed. Old Pyramid of Capitalist System New Pyramid of Capitalist System Money • Money is: - any object that is used for the payment of goods and services - medium of exchange - unit of account - repayment of debts • Almost all money is ‘fiat money’, meaning that it: - derives its value by being declared legal tender by a government - must be accepted as a form of payment within a country Money Supply • The money supply of a country consists of: - currency (e.g. banknotes and coins) - demand deposits (e.g. cheques and savings) • Typically, much greater amounts of money supply is represented by demand deposits than currency. • Although demand deposits are intangible, it still fulfils the same role as money. Human Capital • Human capital is the knowledge, skills and competencies held within individuals. • These attributes within individuals allow them to perform work which generates economic value. • Human capital is the skills acquired through prior education and training. • In neoclassical economics, the Nobel Prize Winning Economist, Gary Becker, wrote a book entitled Human Capital, which became a standard reference for this subject for many years. Gary Becker and Human Capital • Becker saw human capital as similar to physical means of production such as factories in terms of investment. • He argued that people can invest in their education and training in order to gain a return in the labour market. • In other words, greater investment in human capital yields greater output. Introducing Social Networks • Social networks are the social relationships between different actors: - countries (macro) - firms (meso) - individuals (micro) • Only since the 1970s has the analysis of social networks been rigorously theorised rather than applied merely as a descriptive tool. • Scholars argue that there has been a lack of emphasis on individual social networks (Ettlinger, 2003; Grabher and Ibert, 2006). Social Networking Websites Social Capital • Social capital is when individuals invest in their social relationships with different people and expect a return in the marketplace (Lin, 2001): - trust is an important component of social capital • Social networks enable individuals to gain access to the resources of their friends and associates (Bourdieu, 1985): e.g. loans and investment advice from people within their social network • Arguably social capital reproduces inequality because people rise to powerful positions through employing social connections. Building Social Capital Social Structures • Certain types of social structures can encourage or restrain participation in social networks. • In an open structure, an individual, A, might have social relations with two other actors, B and C, who are not connected. • In a closed structure, all members are connected. • If A is acting inappropriately then B and C can impose collective sanctions in the closed, but not the open structure. Homophily • Homophily is the argument that people tend to have significant social contact with people who hold similar social characteristics to themselves (Lazarsfeld and Merton, 1954): e.g. age, gender, class, education, ethnicity or occupation • British expatriates in Singapore tended to socialise with and live near to other expatriates and ‘westernised’ Singaporeans: - they avoided Singaporeans in their home space (Beaverstock, 2002) • The same trend was found with highly skilled migrants moving between Hong Kong and Vancouver (Waters, 2007). Homophily and the Workplace • The higher the position a person holds within a firm, the stronger the homophily principle (Lin, 2001): - as workers enter more senior positions they are more likely to hold networks with people with similar social characteristics: N.B. strength of weak ties Source: McPherson et al. (2001) Recapping on Social Networks and Social Capital • Social networks: http://www.youtube.com/watch?v=6a_KF7TYKVc • Social capital: http://www.youtube.com/watch?v=ND7UgjXHenY • Networking within the classroom: - ask me questions for two minutes - try and gain some value from the conversation Cultural Capital The binary of Economy and Culture • Economy and culture are typically interpreted as a binary. • Derrida talked about ‘logocentrism’: - dividing language into opposite pairs of terms: - the economy is seen as positive - culture is everything the economy is not • Economy: hard, masculine, masterful, about facts. • Culture: soft, feminine, submissive, values. • This separation of economy and culture has led to different areas of inquiry within the social sciences (Barnes, 2005). Hybrids of Culture and Economy (Barnes, 2005) 1. Christmas - Celebrating the birth of Jesus Christ - Spending time with family and friends - Eating and drinking special things - Participating in particular rituals * Receiving presents * Shopping sales * TV adverts and mass consumption * Overdrawn credit cards 2. The Sex Pistols • English punk-rock band that became popular in the mid-1970s: - LP: ‘Never Mind the Bollocks’ - Sold under brown wrapping • Defined a wider youth sub-culture – punk: e.g. ripped clothes, dyed hair, Doc Marten boots, safety pins, specialist language and vocabulary, broader philosophy and politics (Savage, 1993). • The band were about making money: - selling a product, making profits for their sponsors 3. Piece of Lumber • Culture infuses every stage of plank making and selling. • Since European settlement in BC in the mid-19th century, the mastering of forests has been significant: - BC Royal Commissions on forestry (1945) - single industry towns • The culture of work: - Fordism to post-Fordism - highly masculinised (c. 90% male) - patriarchal norms - boys less interested in education – presuming a job in the mills Cultural Capital • Cultural capital are non-financial social assets such as intellectual achievements, which can promote social mobility beyond someone’s financial means. • The term was first introduced by Pierre Bourdieu and Jean-Claude Passeron when they used social capital in "Cultural Reproduction and Social Reproduction" (1973). • Cultural capital acts as a social relation within a system of exchange and the term is extended to all goods that are rare and in demand within social contexts. Bourdieu and Cultural Capital • What Bourdieu argues is that cultural capital is a product of an investment people make, which they can secure a return from. • He argues that cultural capital perpetuates social inequalities. • For example, he would argue that academic success is not a result of natural aptitudes such as intelligence. • For him, ability is socially constructed and the net result of an investment in time and cultural capital. Linking Capitals • Cultural capital is a relational concept and exists alongside other forms of capital such as social, political and natural. Summarising Cultural Capital: • http://www.youtube.com/watch?v=FBn28iNcpBA Conclusions • This lecture has presented a range of important types of capital. • The aim has been to demonstrate that when we think about capital we should try and think beyond purely economic and financial capital. • There is a wealth of material on capital not only in economics, but also in other social science disciplines such as business, sociology, geography, anthropology and political science. Thank you and any questions?