Some of society’s capital stock is social capital. This is capital mainly owned by the state and used to produce goods and services that are not, on the whole, sold for money. Examples of social capital are roads, schools, hospitals, public parks and libraries.

We often use the term ‘SOC’ as a synonym for infrastructure. It is further divided into economic overhead capital and social overhead capital. Eco­nomic overhead capital refers to such things as roads, power transmission systems, telecommunications, etc.; social capital is investment in such ac­tivities as education, health, police, fire, etc.

Infrastructure refers to those economic activities which enhance, directly or indirectly, output, lends of efficiency of transportation, power genera­tion, communication and banking, educational and health facilities and well-ordered government and political structure.

A common feature of economic infrastructure is its high fixed cost and it’s relating low variable costs of operation. As its benefits accrue to numerous diverse groups, its value is often difficult to measure precisely.


The transition from a poor to an affluent society involves a many-sided transformation. The building of social overhead capital (SOC) is essential for achieving self-sustaining growth. SOC not only paves the way for achieving faster growth but their benefits are shared by all. The social benefits far exceed their costs. The buildings, railways, roads, ports, health centres, etc., constitute national capital.

The creation of SOC, although necessary, is a difficult task as they need a huge amount of expenditure. Such capital has a number of distinguishing features. First, their gestation period is long. They are unlikely to yield results in a short span of time. In a word, such investments are not of quick-yielding type.

Second, investment for SOC is generally “lumpy” in the sense that they require large amount of investment at a time. If investments for SOC proceed on a small scale the benefits are unlikely to be substantial.

A big hospital, for example, serves social interests better than a small health care centre. The choice is here between large investment in one go or no investment at all. A third feature of SOC is that profits more often go to the society as a whole rather than to the entrepreneurs who make investment only for making profits.


These characteristics of SOC highlight an important point. A profit-maximising entrepreneur would be reluctant to invest in such projects having no prospect in near future. Hence, the task of building up of SOC falls upon the government. So, W.W. Rostow remarked, “The most important precon­dition for take-off is often political: that is, the establishment of an effective modern government”.