What Is No Business Investment?

What is included in a nation's stock? Discussion of the need to increase investment often focuses on the narrow slice of the nation's capital consisting of business plant and equipment. Many economists are primarily concerned with business equipment because technological advances are embodied in new equipment, so increasing investment is this area will promote rapid productivity change. But national wealth is a much broader concept, so we must not focus only on business investment.

In some investment areas, particularly education and health, governments have major responsibilities. Most pre college education in the United States is funded and operated by state and local governments. Improvements in human capital will come about primarily by improving the efficiency of public schools rather than simply pouring more dollars into them. College education is an interesting case. Studies suggest that investments in human capital involved in going to college have a return of about 10 percent per year. Stimulating private investment or using public funds to increase the amount of college education is n intangibly way to improve productivity and increase economic growth, and it benefits individuals directly.