Prosperity is the ability of an individual, group or nation to provide shelter, nutrition and other material goods that enable people to live what they consider to be a good life. Prosperity helps create space in people's hearts and minds so that they may develop a healthy emotional and spiritual life, unfettered by concerns over basic survival.
Many economists view prosperity as a flow of income: the ability to purchase a set of goods or capture value. We use an upgraded notion of income called 'purchasing power.'
But prosperity is also the enabling environment that improves productivity. We can therefore look at prosperity as a set of stocks. I list here seven kinds of stock or capital, the last four of which constitute social capital:
     i. Basic capital, such as location, subsoil assets, forests, beaches and climate
     ii. Financial capital of a nation, such as savings and international reserves
     iii. Humanly made capital, such as buildings, bridges, roads and telecommunications
    ii iv. Institutional capital, such as legal protections of tangible and intangible property, efficient government departments and firms that maximise value to shareholders and compensate and train workers
     v. Knowledge capital, such as patents, universities and think tanks
    vvi . Human capital: skills, insights and capabilities
   vii.vii. Culture capital - not only explicit articulations of culture like music, language and rituals, but also attitudes and values
Moving away from seeing prosperity as simply a flow of income enables us to consider a broader system and the decisions for investment in an enriched 'high-productive' environment. The Nobel laureate Amartya Sen suggests that “the advantage of a stock view would be to give us a better idea of a nation's ability to produce things in the future.'
Why does prosperity matter?
The African-American philosopher Thomas Sowell says 'We need to confront the most blatant fact that has persisted across centuries of social history - vast differences in productivity among peoples and the'¦ consequences of such differences.' Today, the onset of global recession poses a threat to many of the gains that have been made to prosperity in Africa, Latin America and Asia.
Poverty is closely connected to malnutrition: muscle wastage, stunting of growth, increased susceptibility to infections and the destruction of cognitive capacity in children. Eighty-four percent of all the children in the world live in poverty, defined as an income of less than two dollars a day. Life expectancy, literacy, potable water and infant mortality are correlated with the productivity and prosperity of a nation.
But poverty is about more than statistics; it destroys aspirations, hope and happiness. This is the poverty you can't measure but can feel. There is a rich literature on correlation between higher incomes and productive attitudes toward authority, tolerance of others and support of civil liberties, openness toward foreigners, positive relationships with subordinates, self-esteem, sense of personal competence, the disposition to participate in community and national affairs, interpersonal trust and satisfaction with one's own life.
Beliefs and prosperity
There are various beliefs about what prosperity is and how it is created. Understanding this is the basis for creating change. In Plowing the Sea: Nurturing the Hidden Sources of Growth in the Developing World, Stace Lindsay and I developed several principles related to mental models:
     i. A mental model consists of beliefs, inferences and goals that are first-person, concrete and specific. It is a mental map of how the world works.
     ii. Some beliefs and attitudes are pro-innovation and create the conditions for prosperity. Others are anti-innovation. These beliefs form a mental model.
     iii. A mental model can be defined, informed and tested around a specific, well-defined objective: interpersonal trust, competition, hierarchy, the future, self-determination and the very nature of wealth.
    iv. Nobel laureate Douglass North writes that human beings use 'both'¦ mental models '¦ and institutions' to 'shape the performance of economies.'
    v. Mental models can be changed. Although culture involves the transmission of meaning from one generation to another, it is unlikely that it is a genetic process.
Joseph Stiglitz, Noble laureate and former chief economist for the World Bank, writes that 'development represents a transformation of society, a movement from traditional relations, traditional ways of thinking'¦ to modern ways.' If such prominent people are making the case, why are governments and international institutions so uninterested in mental models research?
Why are there so few formal national or regional change processes in place to change mindsets? Why do the world's foremost development institutions seem so constrained? Even Paul Krugman, the most recent Nobel economics laureate, acknowledges, 'economics is marked by a startling crudeness in the way it thinks about individuals and their motivations'¦ Economists are notoriously uninterested in how people actually think or feel.'
After five decades of, in most cases, frustratingly slow development, mental models may offer the best way to attack the problem of poverty. The development scholar Lawrence Harrison suggests that this type of change will be hard 'because it requires the capacity for objective introspection and attribution to internal factors that touch on the most sensitive questions of self-image and respect.'The sociologist Alex Inkeles agrees that introspection is important: 'It is the mark of a modern nation that it stresses a continuous process of self-analysis...' I constantly wonder whether nations that ask for my help in improving their economies can develop a greater capacity to take responsibility for change, to be self-correcting and to ensure that Thomas Sowell's 'most blatant fact' has less and less to do with the facts of their nation.
Michael Fairbanks is a co-founder of SEVEN, a philanthropic foundation run by entrepreneurs, which produces films, books and research to help spread enterprise solutions to global poverty; and the editor of the upcoming book 'In The River They Swim: Essays on Enterprise Solutions to Poverty.'
Mr. Fairbanks wrote this article for The Independent.
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