Investing in Human Capital

Abstract

This paper is about people. It is also about productivity and growth of an economy. And it is about the proper role of government in a society devoted to using its limited physical and human resources wisely for the economic and social well-being of its people. A nation's output of goods and services, and thus its capacity to raise living standards, is limited by its resources and by the state of technological knowledge regarding how to utilize them. Of the traditional triumvirate of resources-land, labor, and capital-only capital has been thought of generally as subject to significant and appropriate social control. Land is given by nature, while population and hence the labor supply have been considered to be determined by forces outside the economic system. The state of technological knowledge, too, has been considered to be determined largely outside the economic system, except to the extent that resources were directed toward research and development. Moreover, knowledge is significant largely to the extent that it becomes embodied in resources in the form of man-made capital.

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