Lecture 11: Potential of Development

Question 1

Five capitals

Answer 1

human capital, physical capital, social capital, financial capital and natural capital

Question 2

Level of production depends on

Answer 2

levels of different capital stocks

technology of combining different capitals

Question 3

levels of different capital stocks

Answer 3

• Stocks increase with investment in quantity (capital accumulation) or quality (capital upgrading)
• Stocks deplete of they are not maintained –> part of the investment needed for upkeep.

Question 4

technology of combining different capitals

Answer 4

degree of substitution or complementarity between different capitals

Question 5

example complementarity

Answer 5

agricultural innovations often come as a ‘package’ deal

Question 6

example substitution

Answer 6

farmers can tap into different sources of ‘know-how’; formal training (human capital) or informal social learning from peers (social capital)

Question 7

complementarity

Answer 7

a relationship or situation in which two or more different things improve or emphasize each other’s qualities

Question 8

substitution

Answer 8

the action of replacing someone or something with another person or thing

Question 9

poverty trap

Answer 9

created when an economic system requires a significant amount of capital to escape poverty.

When individuals lack this capital, they may also find it difficult to acquire it, creating a self-reinforcing cycle of poverty

Question 10

dead capital

Answer 10

Land or house without legal ownership title cannot be used as collateral (Dutch: ‘onderpand’) to get loan from bank

Question 11

De Soto: mystery of capital

Answer 11

The poor stay poor because they cannot use their natural, physical or even human capital to build financial capital.

Reason: no formal ‘proof’ of land, house, diploma, or even identity

Question 12

legal system as ‘gatekeeper’ to capitalism - result

Answer 12

the poor face daunting bureaucratic obstacles in business registration etc. (‘red tape’)

Question 13

consequences for poor people when the legal system is gatekeeper for capitalism

Answer 13

poor have no other option than to operate in the informal (extra-legal) sector

Question 14

three types of social capital

Answer 14

1. bonding social capital
2. bridging social capital
3. linking social capital

Question 15

bonding social capital

Answer 15

relationships amongst members of a network who are similar in some form

Question 16

bridging social capital

Answer 16

relationships amongst people who are dissimilar in a demonstrable fashion (age, gender, education, race and ethnicity)

Question 17

linking social capital

Answer 17

extent to which individuals build relationships with institutions and individuals who have relative power over them (e.g. to provide access to services, jobs or resources)