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Consider this quote from Schultz:
"Another aspect of the same basic question is the rapid postwar recovery of countries that has severe destruction of plant and equipment during the war. The toll from bombing was all too visible [...] Economists were called upon to access the implications of these wartime losses for recovery. In retrospect, it is clear that they overestimated the prospective retarding effects of these losses. The explanation that is now clear is that we gave altogether too much weight to nonhuman capital in making these assessments. We fell into this error; I am convinced, because we did not have a concept of all capital and, therefore, failed to take account of human Capital and the important part that it plays in production in a modern economy."
Thereafter, Schultz sought an all-inclusive concept of “capital.” He posited that the reason for which economists expressed such hesitation in designating Human Capital formation as a form of investment developed out of our own self-conscious abhorrence of our slavery tainted past , so that “our values and beliefs inhibit us from looking upon human beings as capital goods.” He noted that because the economic community has exercised a calculated resistance to the importance of Human Capital, measurements of total investments in the economy are often times grossly understated . Schultz argued that it is “the simple truth that people invest in themselves and that these investments are very large ”. Improvements to education and healthcare can pave the way to increased standard of living especially in developing countries .”
Gary Becker (Nobel Laureate, 1992) contribution to this (and other fields in economics) also revealed a great capacity for creative thinking. His
Human Capital (1964) utilizes economic theory, statistics and observations to demonstrate the importance of investment in education at all levels.
Gary Becker, (1964),
Human Capital, Chicago, IL: University of Chicago Press.
We have already seen from Chapter___, Tables ___ and ___ that in developed and developing nations today, human capital investments far exceed those in physical capital especially in the former. The size and potency of investment in Human Capital for economic growth is in large part due to the effects of Human Capital formation on stocks of knowledge and skills, especially its effects on the cumulative stock of knowledge. This is one of the great enduring investments in Human Capital: it tends to cumulate from generation to generation, while physical capital wears out and must be replaced every 5-10-15 years.
There is by now very substantial evidence on the importance and effects of investment in Human Capital: it has long driven economic growth in the U.S. Several studies, especially NBER No. 8787, Paul Beaudry&David A. Green (2002, February), “Changes in U.S. Wages 1976-2000: Ongoing Skill Bias or Major Technological Change?” NBER Working Paper No. 8787. conclude that in the final 25 years of the 20 th century, Human Capital formation was far more important in the growth process than Physical Capital formation over the period, and as we have seen, since then.
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