Question

How would you define human capital from the perspective of the economics of education? As a government adviser, what policies would you recommend for encouraging investment in human capital and why?

Answer 1

Human capital is defined as an accumulation of skill sets, productivity or art of doing, knowledge built through self-learning and experience, presence of ethical values, expression of multi-dimensional approaches, good health and conditioning and all such factors gravitating towards the perpetual state of perfection.

When an investment in human capital is made it reaps not just economic benefits but social benefits over time for self, community and society at large. At times human capital gets so well ingrained that it becomes part of genetic structure of the individual and gets manifested overtime by generations.

Investment in Human capital can lead to -

• Enhanced human capabilities - This could mean augmenting production and creative possibilities through skill and training. Past data suggests many countries becoming integral part of global production and positioning through enhanced human capital and capabilities.
• Broaden the horizon of the individual to contribute towards progress.
• Improve standards of living through economic development. - Removing poverty, hunger, inequality, providing fair opportunities to workforce, uplifting depressed classes etc.
• Leads to investing in merit good - The fundamental problem of economics have been to choose production and investment between guns and butter. One may debate about how much of each good should be produced and distributed. However when it comes to investment in human capital development it is undebatable because whatever is invested will reap benefits of some kind. This is because the very nature of education is meritorious.
• If individuals are well skilled and endowed with necessary resources to live the life they value it encourages positive mindset. Postive mindset gets reflected in good expectations and motivation about future outcomes.  

Policy recommendations :

• Investment in directed and relevant R & D.
• Collaboration between institutions of importance and businesses to develop solutions in healthcare, infrastructure, transport, residential, delivery of government services etc.
• Combining and working with technology to improve education standards.  
• Investment in skill development in a way that reduces skill gap within the economy by matching jobs with skill sets.