Econ2D03Yan Ling, Zhen1055775
ECONOMIC 2D03 ASSIGNMENT #1
Student:Yang, Zhi Xing
Question #1: What is social capital? What are the components of social capital? Compare
and contrast social capital from economic capital?
(a) Social capital refers to the norm of trust and networks possessed by individuals and their
communities; it’s extent and nature are often measured by the number and strength of
(b) The components of social capital are many and varied. For example, first one is group
characteristics, which involves degree of membership homogeneity/heterogeneity, large or small
group, frequency of participation and participation in decision-making and source of funding.
Second one is the generalized norms, which contains trustworthiness of people, helpfulness and
fairness of people. Third one is togetherness, such as neighborhood connections in situation of
sickness and calamity, how well they interact with each other, sociability and volunteering. Last
one is trust that included trust of family, trust of community people, trust of business owners, and
trust of government officials and so on.
(c) Economic capital is generally referred as tangible and durable object, such as building,
equipment and machinery, houses, etc. On the other hand, social capital is intangible. The
components of social capital are many and varied and intangible, and it is not measurable.
Investment in economic capital is expensive, but an investment in social capital does not cost so
much, and it brings long-lasting return. Physical capital in economic is viewed as technical
relationships between capital and labor and output and its rate of return is judged in monetary
terms. Social capital is not measured in monetary or units. It depends on use to which they are
put to, the worth of social capital depend on the kind of activities in which the members of the
networks are engaged. In common, Economic capital and social capital are both can have good
used and bad used. Econ2D03Yan Ling, Zheng1055775
Question #2: What are the flaws and omissions in conventional GDP accounting? What
modifications are needed to make GDP a good proxy of economic progress?
(a) There are some important flaws of conventional GDP accounting are: 1. It ignores pollution-
damages, resource depletion and environmental degradation; 2. It emphasizes current production,
rather than consumption and sustainability; 3. It emphasizes quantity of output, rather than
quality; 4. It ignores income-distribution and poverty; 5. It ignores non-market activities, like
services of home - maker; 6. It ignores the value of leisure; 7. It defines investment narrowly.
Spending on health, education and human capital is not considered as investment spending.
And conventional GDP accounting of investment also excludes spending on: Human capital,
education, research; Health or Recreation; Physical and