Intangible Capital and Modern Economies

Authors: Carol Corrado, Jonathan Haskel, Cecilia Jona-Lasinio, and Massimiliano Iommi

Abstract

The production of goods and services is central to understanding economies. The textbook
description of a firm, typically in agriculture or manufacturing, focuses on its physical “tangible”
capital (machines), labour (workers) and the state of “know-how”. Yet real-world firms, such as
Apple, Microsoft, Google, have almost no physical capital. Instead, their main capital assets are
“intangible”: software, data, design, reputation, supply-chain expertise, and R&D. We discuss
investment in these knowledge-based “intangible” capital: how to measure it, how it affects
macroeconomic data on investment and GDP, and how it relates to growth theory and practical
growth accounting. We present estimates of productivity in the US and European economies in
recent decades including intangibles and discuss why, despite a growth in intangible capital and
what seems to be a modern technological revolution, productivity growth has slowed down
since the global financial crisis.