How much is ‘social trust’ worth? A lot

Are you enjoying being a millionaire? A new study from the World Bank, co-authored by economist John Helliwell of the University of British Columbia, estimates that Canada’s capital assets — produced, natural, human and social — are worth $923,580 per person. Or were in 2010. As those are U.S. dollars, that puts us over C$1 million per person.

Though a million dollars ain’t what it used to be, it does put us in an exclusive neighbourhood. The U.S. average (again in U.S. dollars) is $990,947. The Netherlands’ is $966,245. The U.K.’s is only $798,145, France’s $713,434 and Italy’s $662,003.

Now, don’t bet your million on those numbers being exactly right. Inventorying a whole country’s wealth is devilishly difficult. But even as rough estimates, the scale is interesting — big — and so are the country rankings.

So what exactly is being measured here? “Produced capital” is easiest to grasp, if still hard to count. What’s the value of all man-made assets in Canada? Houses, business buildings, streets, dams, railways, highways, machines, microwave towers and so on. If you wanted to buy it all — if it were all available on eBay — the estimate is it would go for $112,845 per Canadian.

Natural capital is, as the TV commercial says, priceless. But studies that do try to price it suggest Canadians have $87,218 per capita, almost double the U.S. value. As a glance at the map teaches, we’re a big standout for natural capital.

“Human capital,” when you first hear the term, may seem offensive and dehumanizing. But if you think about it, it’s not so bad. If someone can earn $50,000 a year, say, and reasonably expect to do so for 30 years, what’s the capital value of that income stream? What sized asset would you need in order to generate the same flow of income? That obviously depends on the rate of interest the asset pays. At a lower rate, as would-be retirees are discovering these days, you need a bigger asset. At a higher rate, a smaller asset will do. Most spreadsheets will do this calculation for you. If I’ve entered everything correctly onto mine, with an assumed interest rate of 1.5 per cent, the “human capital” generating the income flow I’ve described is $1.2 million.

Human capital is the biggest source of capital. (“People are our biggest asset,” as the CEOs always say, unconsciously echoing Karl Marx.) For us, it accounts for over half of our million dollars per capita, a common ratio across countries.

Which leaves social capital, in particular, social trust. What capital value could you place on how much people trust each other? Intuition says it’s very important, but how in the world would you measure it? Good question. In fact, that’s the true focus of the World Bank study, with the national totals calculated mainly to demonstrate that it is important.

For a while now economists have used public opinion surveys of how people feel about their lives to try to figure out by how much extra income makes them better off. It generally does, though in some studies not as much as you might think. But if you know that an extra $X of income raises a person’s well-being by amount Y on a one to 10 scale, then if something else raises it by Y, too, it’s not unreasonable to assume the “something else” has a value of $X. Here the “something else” is social trust. Where measures of trust are higher, well-being generally is higher, too.

It’s bit of a leap and the interconnections between variables are complicated. But the researchers’ main argument is not that social capital has this or that precise value, but that it’s important. For us, it’s $229,120 per person, more than in the U.S. ($204,134) but less than in the Netherlands ($275,867) — and almost three times the per capita value of our natural resources. Being that important, the researchers argue, it needs to be tracked and nurtured.

Which is the source of another “how in the world” question: How in the world do you nurture social trust?

What capital value could you place on how much people trust each other?