Human Capital

… a core term used in Economic Analysis and Atlas102

Definition

Alex Tabarrok (reference below) defines human capital as tools of the mind, the stuff in people’s heads that makes them productive.

The Economist (reference below) defines human capital as the stuff that enables people to earn a living.

The Economist goes on to say:

“Human capital can be increased by investing in education, training and health care. Economists increasingly argue that the accumulation of human as well as physical capital (plant and machinery) is a crucial ingredient of economic growth, par­ticularly in the new economy. Even so, this conclusion is largely a matter of theory and faith, rather than the result of detailed empirical analysis. Economists have made little progress in solving the tricky problem of how to measure human capital, even within the same country over time, let alone for comparisons between countries. Levels of spending on, say, education are not necessarily a good indicator of how much human capital an education system is creating; indeed, some economists argue that higher education spending may be a consequence of a country becoming wealthy rather than a cause. Nevertheless, even modest estimates of the stock of human capital in most countries suggests that it would pay to greatly increase investment in medical technologies that would extend the working lives of most people.”

Atlas topic and subject

Labour Markets, Transfers, and Personal Taxes (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Sources

Alex Tabarrok, minute 1:21 in Human Capital and Signaling (7-minute video), Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/human-capital-wages-education-globalization, accessed 8 May 2016.

The Economist, Human capital, Economics A-Z, at http://www.economist.com/economics-a-to-z/h#node-21529828, accessed 8 May 2016.

Page created by: Ian Clark, last modified 8 May 2016.