Public Policy and Intangibles

Haskel and Westlake in their excellent book “Capitalism without Capital” point out the problems that record keeping has with intangibles. (My last comment on this book I promise).

Asymmetric Reporting

They note the asymmetry of the rules around intangible reporting. Namely that intangibles are reported in certain situations even though intangible reporting is thought to be too hard to do properly. This is something I have noted before but seemingly erratic reporting of intangibles makes it hard to see their impact on the national economy. If policy makers don’t see the importance of intangibles in the public records then policy makers are unlikely to turn sufficient attention to intangibles, and the implications of an intangible heavy economy, as Haskel and Westlake would like them to do to improve public policy.

Changes to the equity base (and ROE)

The authors note the problem of reporting ROE (Return on Equity). I have often thought about this — many of the metrics we use are very misleading because they don’t really tell us what they claim to reveal. Not accounting properly for intangibles leads to the misstatement of equity. When equity is misstated then return on equity isn’t really a meaningful measure.

The authors go beyond the simple measurement problems and suggest that intangibles actually create the need for different funding of firms. They suggest that firms may have less debt and more equity to cope with the uncertainties of the intangible economy, an interesting idea.

What are the Public Policy Implications?

Haskel and Westlake outline a bunch of policy proposals. Many of which are very interesting, some may be a bit speculative. (But I have no problem with that; they don’t know the future and, like any of us, can only give it their best guess). They do suggest that greater funding goes into education. I happen to agree with them — I think the logic they outline makes sense but I suspect that as an academic I was never the sort of person they would have a problem convincing of this.


The world is a different place from that envisaged when reporting systems where set up given the importance of intangibles to many modern economies. The implication is that: “Financial investors who can understand the complexity of intangible-rich firms will also do well” (Haskel and Westlake, 2017, page 206). This seems like a compelling call to train financial people in marketing and invest more in marketing education.

Read: Jonathan Haskel & Stian Westlake (2017) Capitalism without Capital: The Rise of the Intangible Economy, Princeton University Press