When we guess at how well-off someone is, we typically have no idea what they earn. What we do observe is the neighbourhood they live in, the size of their home, or the model of car they drive. Some of these signs of prosperity can be bought on credit, at least in the short-term, but in general they reflect what a person owns, which is a good marker of how secure they are likely to be in the years ahead. A retired schoolteacher may have a lower pension income than a college graduate with a well-paid banking job. While on the one hand, the retired teacher may own a house and have accumulated savings and investments over her lifetime that she can draw down in retirement, the college graduate has a recent education, presumably good health, and 40 years of earnings ahead of her, which also counts as capital.

These ideas are relevant to how we think about countries and economic well-being. Since the 1930s, when Simon Kuznets produced the first official estimates of American national income, and especially since World War II, countries have measured economic progress mainly by national output, now summarised as Gross Domestic Product (GDP). Without doubt, GDP is useful. It tells us how much a country produces in a given period. But, it is a measure of economic activity, rather than of wealth, the stock of assets that generates that flow.

A country’s wealth or capital comes in several forms. First there are roads, buildings, factories, electricity grids, ports and public transportation........

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