The four capitals: the economist's model for sustainability

Knowledge and asset flows

Community asset flows

When economists think of sustainability, they deal in their familiar terms of assets or capital, their productive uses and the benefits that flow from them that provide well being. Assets and capital have the same meaning in this context of being resources. In standard economics, the resources would be monetary, or exchangeable or tradable goods. In recent years, standard economic theory has been broadened by ecological economists to include natural and even human/social assets or capital and their interrelationships.

NATURAL CAPITAL can be said to consist of three major components:

1.       NON-RENEWABLE RESOURCES such as oil and minerals that are extracted from ecosystems,

2.       RENEWABLE RESOURCES such as wild food harvests (i.e. fish) wood, and drinking water. These are produced and maintained by the processes and functions of ecosystems,

3.       ENVIRONMENTAL SERVICES such as maintenance of a breathable atmosphere, regulation of climate, production and maintenance of soil and operation of the water cycle.

HUMAN-MADE CAPITAL is generated via economic activity through human ingenuity and technological change - the produced means of production. It is not possible for human ingenuity to create human-made capital without the support and resources from natural capital. But having linked these two capitals, where now is our formula that integrates them together in sustainability? Two ecological economists (Fikret and Folke, Ecological Economics, Vol. 5 No.1, October 8 1991) have recognised an additional capital that they believe when integrated could provide the benefits of well being in a sustainable way.

CULTURAL CAPITAL refers to factors that provide human societies with the means and adaptations to deal with the natural environment and to actively modify it. This includes how people view the world and the universe; environmental philosophy and ethics; traditional ecological knowledge; and social and political institutions.

Cultural capital covers the wide variety of ways in which societies interact with their environment and thus includes cultural diversity. The links between the capitals in this model are that cultural capital will decide how we will use the natural capital to create human-made capital that provides for our well being. The authors predict that if knowledge of cultural self-regulatory patterns (i.e. optimising rather than maximising) is combined with improved understanding of self-organising principles in ecosystems (i.e. Permaculture!) then it could lead towards sustainable solutions.


The World Bank has also promoted a model for sustainable well being based on the stocks of social assets or capitals. The Bank is owned by 182 member countries, and its purpose is to reduce poverty and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity, and forging partnerships in the public and private sectors. Their model has a natural capital and three other capitals that are variations on those above:

ENVIRONMENTAL CAPITAL is the natural capital as above

SOCIAL CAPITAL is the level of trust between people and the amount of help and support within a community

HUMAN CAPITAL is the stock of skills and qualifications as they relate to people’s ability to do work, and thus must also include their health

FIXED OR PHYSICAL CAPITAL is made up of homes, roads, schools, hospitals, factories and machinery

The model is based on the principle that none of the capitals are complimentary – investing more in one will not compensate or substitute for lack of investment or a loss in another. There are, however, spillovers (crossovers) that can arise between the capitals, and it is important that these always be positive (i.e. beneficial) rather than negative or harmful. Poor housing (fixed capital) can cause ill health (human capital). A good shared open space in a community (environmental capital) can provide more opportunities for communities to meet together (social capital). A traffic-calming scheme (fixed capital and environmental capital) can increase social interaction in a street (social capital – see schematic).

SOCIAL CAPITAL is the glue that holds societies together

Mark Fisher - Permaculture Design course handout notes