Should You Focus on Human Capital Instead of on Money?
Human capital: n. “the collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community” (Dictionary.com).
Money: n. “any article or substance used as a medium of exchange, a measure of wealth, or means of payment, as checks on demand, deposit, or cowrie” (Dictionary.com).
Human capital is a concept that Thomas Sowell, a black economist, mentions is a factor that increases a population’s standard of living more than money does. However, is his claim fair?
Think for a minute and ask yourself, “Where did the goods and services that I use today result from?” Now, look at your hands and at your body. Point to your head and to your chest. There’s your answer. They resulted from the hands, bodies, minds, and souls of individuals.
As shown in the image below (Roser 2021), extreme poverty engulfed the world in the 1800s while illiteracy and lack of basic education-two features of human capital-were the norms. Yet, as literacy rose, so did basic education, and the level of extreme poverty in the world declined.
That connection may be oversimplified but not surprising. Once people learned to read and write, they could educate themselves and/or be educated. Consequently, they acquired skills, developed habits, and gained knowledge; they increased their human capital. As their human capital rose, so did their ability to work and produce economic value in the form of clothing, infrastructure, and healthy food. Combined with other factors, extreme poverty was decreased to a level that is far below the level in the 1800s.
One individual whose human capital impacted the world is Thomas Edison. He invented the lightbulb using intellect, education, and skills. Consequently, late-night work shifts, nighttime travel, and other activities were possible; economic productivity increased too. What if his mother did not home school him or he didn’t attend college? What if his father didn’t hire him to work as a telegraph operator? Barring other factors-economic conditions, governmental power, motivation-perhaps the lightbulb wouldn’t have been invented.
Now, money is important in the 21st century, since it is what we mainly use to buy goods and obtain services. Yet, if there were no goods or services present, then would money matter? Perhaps, in the sense that it would be used as something to wipe floors or tables with.
Arguably, governments that do not allocate money or resources to improving education, sanitation, and infrastructure for their citizens are doing their countries a disservice. They may not understand that the total human capital of all their citizens impacts their country’s standard of living and wealth prospects. Their misunderstanding may stem from not hearing the cries of their people, a love of money, or a lack of knowledge.
Ultimately, Sowell’s claim is a fair one, especially if one dives into the history of the world and into economics. Instead of fixating on money, focus on increasing your human capital through enrichment, education, and effort. Doing so will likely increase your earnings.
#WOMM
[1] Dictionary.com. (2021, February 4). Retrieved from Dictionary.com: https://www.dictionary.com/browse/human-capital
[2] Dictionary.com. (2021, February 4). Retrieved from Dictionary.com: https://www.dictionary.com/browse/money
[3] Roser, M. (2021, February 4). The short history of global living conditions and why it matters that we know it. Retrieved from Our World in Data: https://ourworldindata.org/a-history-of-global-living-conditions-in-5-charts
