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Books and arts The Economist December 16th 2017 75

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76 A history of New York
76 How fishing fed the world
77 American prisons
78 Johnson: The conversation machine

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Economics overall investment has fallen since the
Capital in the 21st century financial crisis of2008-09.)
Messrs Haskel and Westlake do not
simply recommend improvements in sta-
tistics, but also explain the significance of
intangibles. They argue that intangible in-
vestment has a number of special proper-
ties, which will make themselves felt as
this sort of investment becomes more im-
Businesses’ investmentdecisions can have huge, unexpected consequences
portant. While the authors may overstate
ICH economies are full of puzzles. Capitalism without Capital: The Rise of the novelty of some of their ideas, they
RWhat has caused them to become so combine them in a new way.
unequal? Why is their rate of business the Intangible Economy. By Jonathan For one, intangible investment is “scal-
investment so low? When will real wages Haskel and Stian Westlake. Princeton able”. Businesses which use intangible as-
start growing strongly again? In “Capital- University Press; 278 pages; $29.95 and sets can grow more rapidly, and to greater
ism without Capital” Jonathan Haskel of £24.95 sizes, than those using tangible ones. A
Imperial College London and Stian West- family-run taxi firm that owns a fleet of
lake ofNesta, a think-tank, offer an intrigu- is on the increase. One study suggests that cars cannot easily grow; doing that re-
ing explanation for all these problems. In in 1948, American intangible investment quires them to expand their fleet, at great
the process, they introduce a phrase that accounted for about 4% of non-farm busi- cost. By contrast Uber, a car-hailing app,
readers may hear a great deal more of in ness-sectoroutput. By2007 thishad grown which ownsfewofthe carsthatuse its plat-
the comingyears: “intangible investment”. to 14%. Tangible investment hovered form, can export its code across the world.
When people think about business in- around the 11% mark over the period. An- Intangible investment also exhibits
vestment, they tend to think of spending otherestimate found thatMicrosoft’sphys- large spillover effects, argue Messrs Haskel
on real things, like factories, computers ical assets accounted for just 1% of its mar- and Westlake. Abusinessinvestingin a fac-
and machines. Yet Messrs Haskel and ket value. The expertise of Microsoft’s tory, a form of tangible investment, can
Westlake point out that such investment engineers and the code they used were far easily prevent its competitors from taking
matters less and less to modern econo- more important. advantage of that investment (say, by put-
mies. Instead, they argue, investment in However, the significance of intangible ting a guard at the gate). Excluding rivals
intangible assets—things you cannot drop assets is often poorly reflected by statisti- from profiting from your intangible invest-
on your foot—is more important. Intangi- cians. Official economic data do include ments is harder. Software developers use
ble investment can include design, re- some intangible activity, such as spending online repositoriessuch asGitHub to share
search, software and branding. It is a fun- on software, in measures of investment code. Steve Jobs, a former boss of Apple,
damentally different sort of investment, spending, but often exclude many others, was known to grouse that Google’s An-
and one that has serious consequences. such as branding. American company ac- droid operating system was hardly differ-
The book makes its case in a lightheart- counts often omit R&D from measures of ent from Apple’s iOS.
ed, conversational way that will appeal to their investment spending. But including The scalability and spillovers associat-
economistsand non-economistsalike. The intangible assets can have a bigimpact. ed with intangible investment may help
authors keep jargon to a minimum. Their It is often said, for instance, that British explain some of the big puzzles of ad-
writing has few numbers, let alone equa- businesses invest little compared with vanced economies. In recent years, the
tions. Multiple case-studies bring the argu- those in othercountries. YetBritain isan in- gaps between the most successful firms
ments to life. Nonetheless, this is no beach tangible-rich economy, full of scientific and the weakest among them (“frontier
read. The authors draw on a range ofrigor- firms and design studios. Once intangibles firms” and “laggards”, in the jargon) have
ous research and include their own calcu- are included, Britain looks less ofa laggard. widened in everything from wages to pro-
lations to show that intangible investment (Data still suggestthatacrossthe rich world fits. Whereas 1% of British firms have seen 1