Human Capital Concept & Theory PDF

HUMAN CAPITAL (CONCEPT AND THEORY) WHAT IS HUMAN CAPITAL?  - In economics, “capital” refers to all of the assets a business HUMAN + needs to produce the goods and services it sells. CAPITAL Human Capital: Very subjective - A set of intangible qualities....

HUMAN CAPITAL (CONCEPT AND THEORY) WHAT IS HUMAN CAPITAL?  - In economics, “capital” refers to all of the assets a business HUMAN + needs to produce the goods and services it sells. CAPITAL Human Capital: Very subjective - A set of intangible qualities. - Somethings inside human. - According to the OECD (2019), human capital is defined as the knowledge, skills, competencies and other attributes embodied in individuals or groups of individuals acquired during their life and used to produce goods, services or ideas in market circumstances” Theory of Human Capital “Intangible capital; Schooling, a computer training course, expenditures of medical care, and lectures on the virtues of punctuality and honesty also are capital. That is because they raise earnings, improve health, or add to a person's good habits over much of his lifetime. Therefore, economists regard expenditures on education, training, medical care, and so on as investments in human capital. They are called human capital because people cannot be separated from their knowledge, skills, health, or values in the way they can be separated from their financial and physical assets.” Sources:https://www.econlib.org/library/Enc1/HumanCapital.html TUTORIAL 1 Based on your human capital concept understandings, please listed at least 5 examples of human capital values that you think very important as a student: Example: 1. Knowledge 2. 3. 4. 5. Sources: https://www.google.com/url?sa=i&url=https%3A%2F%2Fblog.auditanalytics.com%2Fa-closer-look-into-human-capital-management- disclosures%2F&psig=AOvVaw0_xZ4hqRTQm2OI44keNXmC&ust=1697237060819000&source=images&cd=vfe&opi=89978449&ved=0CBMQjhxqFwoTCLib2PLK8YEDFQAAAAAdAAAAABAh Sources: https://www.google.com/url?sa=i&url=https%3A%2F%2Fhelpfulprofessor.com%2Fhuman-capital- examples%2F&psig=AOvVaw0_xZ4hqRTQm2OI44keNXmC&ust=1697237060819000&source=images&cd=vfe&opi=89978449&ved=0CBMQjhxqFwoTCLib2PLK8YEDFQAAAAAdAAAAABAp Sources: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.betterup.com%2Fblog%2Fhuman- capital&psig=AOvVaw0_xZ4hqRTQm2OI44keNXmC&ust=1697237060819000&source=images&cd=vfe&opi=89978449&ved=0CBMQjhxqFwoTCLib2PLK8YEDFQAAAAAdAAAAABAx HUMAN CAPITAL IN ECONOMICS  human capital is more than simply the physical labor of the people who work for an organization. It is the entire set of intangible qualities those people bring to the organization that might help it succeed.  Human capital theory holds that it is possible to quantify the value of these investments to employees, employers, and society as a whole. According to human capital theory, an adequate investment in people will result in a growing economy. HC THEORY The standard approach in labor economics The theory of human capital was formed views human capital as a set of within the framework of the conceptual skills/characteristics that increase a foundations of the new classical theory and worker’s productivity. was further developed by various researchers who enriched the theory of human capital with the achievements of institutional, behavioral, evolutionary and synergetic theories. Human Capital Human capital becomes the most important factor in the post- industrial economy as the paradigm of development of economic growth, human intellectual and creative potential changes. abilities become a source of development. Adam Smith (1776) - The idea of human capital theory is often credited to the “founding father of economics” Adam Smith, who in 1776, called it “the acquired and useful abilities of all the population or members of the society.” Smith suggested that differences in wages paid were based on the relative ease or difficulty of doing the jobs involved. Karl Marx (1859) - In 1859, Prussian philosopher Karl Marx, calling it “labor power,” suggested the idea of human capital by asserting that in capitalist systems, people sell their labor power—human capital—in return for income. In contrast to Smith and other earlier economists, Marx pointed to “two disagreeably frustrating facts” about human capital theory: 1. Workers must actually work—apply their minds and bodies—in order to earn income. The mere ability to do a job is not the same as actually doing it. 2. Workers cannot “sell” their human capital as they might sell their homes or land. Instead, they enter into mutually beneficial contracts with employers to use their skills in return for wages, much in the same way farmers sell their crops. The Becker View Human capital is directly useful in the production process. More explicitly, human capital increases a worker’s productivity in all tasks, though possibly differentially in different tasks, organizations, and situations. In this view, although the role of human capital in the production process may be quite complex, there is a sense in which we can think of it as represented (representable) by a unidimensional object, such as the stock of knowledge or skills, h, and this stock is directly part of the production function. The Gardener View According to this view, we should not think of human capital as unidimensional, since there are many many dimensions or types of skills. A simple version of this approach would emphasize mental vs. physical abilities as different skills. Let us dub this the Gardener view after the work by the social psychologist Howard Gardener, who contributed to the development of multiple-intelligences theory, in particular emphasizing how many geniuses/famous personalities were very “unskilled” in some other dimensions. The Schultz/Nelson-Phelps View Human capital is viewed mostly as the capacity to adapt. According to this approach, human capital is especially useful in dealing with “disequilibrium” situations, or more generally, with situations in which there is a changing environment, and workers have to adapt to this. The Bowles-Gintis View “human capital” is the capacity to work in organizations, obey orders, in short, adapt to life in a hierarchical/capitalist society. According to this view, the main role of schools is to instill in individuals the “correct” ideology and approach towards life. The Spence View Observable measures of human capital are more a signal of ability than characteristics independently useful in the production process. HC is very unique!!