The dollar value of good institutions

I am still taken by the World Bank's research on intangible wealth (my blog of last Saturday). Their estimate of intangible wealth per U.S. worker was just over $400,000. Congenial institutions, in their view, are part of intangible wealth.

But if I take the NPV of U.S. GDP (all 2006 data here) and subtract the dollar value of the labor force (at $5-million per worker) and also subtract the BEA's estimate of the value of fixed assets (less consumer durables), then the only way that I can get a residual (per worker) that is close to the WB result is to use a discount rate of 1.47%. That's low but not crazy. It assumes a very low-risk asset (the U.S. economy in this case).

This is back-of-the-envelope and does not follow the WB report's approach. But it works. Undermine institutions, add risk and the discount rate goes up bringing the residual down.