Gary S. Becker: Human Capital

Gary S. Becker: Human Capital

Human capital refers to the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.

“Schooling, a computer training course, expenditures on medical care, and lectures on the virtues of punctuality and honesty are capital too in the sense that they improve health, raise earnings, or add to a person’s appreciation of literature over much of his or her lifetime”; consequently “expenditures on education, training, medical care, etc., are investments in capital” [Gary S. Becker, Human Capital Revisited]

The human capital behave quite much as the material one: health can be lost and the knowledge can be damaged (forgotten) but human capital, on the contrary of material one, can’t be separated by the physical person.

The consequences for this characteristics are very important. If a person wants to maximize the profit for her/his human capital (a certain knowledge or a specific skill) it is convenient for her/him to invest it where it has the highest return of investment – in other words, where it is evaluated the most.

But the human capital can’t be detached by its owner: this implies that if a person wants to maximize the profit it is necessary to move where the human capital is paid the most. This is the cause, among many other examples, of the Italian “brain drain” (fuga di cervelli): students, on whose human capital the Italian state has invested, once they have finished the studies move in other countries because that specif human capital (the knowlegde, the skills that the state has contributed to develop) isn’t paid as much as in other countries.

18th at Augusta : Gary Becker: The Ideal Public Intellectual

The formulation of human capital

The first person who has introduced the concept of human capital is Gary S. Becker, who won the Nobel prize “for having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including nonmarket behaviour”. His work on human behaviour started one morning, when he was late for work because he couldn’t find a parking lot. As every other person that is in this unhappy situation he faced two options: continue seeking for an empty lot, or parking in a forbidden spot risking a fine. Because of this situation he began to ask himself: what cause the illegal behaviour of human beings?

He supposed that a criminal followed a simple economic principle: pursuing the most advantage possible, having weight the possible damages. It is convenient for a person to commit a crime? Let’s take as example paying the ticket on the bus: the revenue is represented by the non loss of the cost of the ticket, while the risk of this peculiar type of investment is the possibility to be fined. Who doesn’t pay the ticket faces this situations and consider that the risk is lower than the revenue, so it is convenient to not pay the ticket.

How the society and the Politics can modify the criminal behaviour?

For example, it is possible to invest money in the frequency of controls, or to increase fines; or it is possible to invest in the human capital of the overall society, for example encouraging an ethical behavior. We don’t know if Becker found a parking or took the risk of a fine.

Roberto Fini, Economisti da Nobel: l'economia letta attraverso i vincitori del prestigioso premio, Editore Ulrico Hoepli Milano, ed 2017
Human Capital Revisited, Gary S. Becker : (p. 15 - 28)

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