Measuring Intangibles

The measurement of intangibles is nothing new. Humans have been measuring intangibles for a long time. Whenever a teacher assigns a grade, they are measuring an intangible (the student's knowledge). Whenever a boss gives or does not give an employee a raise or a bonus, they are implicitly measuring the employee's skill level and value added to the company. Whenever a customer chooses one color, make, and model of a car over another, they are measuring a number of intangibles. Whenever an investor buys a company's stock based on an expectation of future gain, they are investing in intangibles.Until recently, however, macroeconomics treated intangibles as residuals. The most famous examples are Solow's residual and Tobin's Q. With the rise of endogenous growth theory and the recognition of the importance of intangibles as drivers of economic value, more attempts have been made to specifically measure the value of intangibles. As part of this effort, intangibles have come to be seen as assets (stocks) as well as expenditures (flows). These efforts have advanced progress to quantify intangibles. However, as this summary paper will show, a number of important issues remain unresolved