Conquering or mapping? Textbooks and the dissemination of human capital theory in applied economics

ABSTRACT¹

¹ A preliminary version of parts of this text was presented at the Fifth Annual Conference on the History of Recent Economics (Duke University, April 2011) and the UK Meeting of History of Economic Thought (Oxford University, September 2011). I am very grateful for the comments and encouragement received on those occasions, especially from Avi Cohen, Roy Weintraub, Roger Backhouse, Steve Medema, and Yann Giraud. I am very grateful to the comments by the Journal's Editor and by two very careful and sympathetic reviewers. The usual caveat applies and all the remaining errors and omissions are my sole responsibility.

Textbooks are an important subject for the study of science in general and economics in particular. In this paper, we analyse at the process of the acceptance of human capital theory through its inclusion in economics textbooks by looking at two specialized fields to which this theory became highly influential: labour economics and the economics of education. The analysis will compare the patterns of the dissemination of these new theoretical developments in a more consolidated field and in an emergent field of economics research with a particular focus in the early stages of that dissemination process.

KEYWORDS:

• Textbooks
• education
• applied economics
• human capital
• labour
• professionalization

JEL CODES:

• B20
• B21
• I20
• J01
• J24

Acknowledgments

This project was initiated many years ago and it has benefited from the comments and encouragement of Roger Backhouse, Steve Medema, John Maloney and the late Mark Blaug. I am deeply grateful to all of them. I am also very grateful for the helpful and constructive criticisms of the editors and by two anonymous reviewers.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ A preliminary version of parts of this text was presented at the Fifth Annual Conference on the History of Recent Economics (Duke University, April 2011) and the UK Meeting of History of Economic Thought (Oxford University, September 2011). I am very grateful for the comments and encouragement received on those occasions, especially from Avi Cohen, Roy Weintraub, Roger Backhouse, Steve Medema, and Yann Giraud. I am very grateful to the comments by the Journal's Editor and by two very careful and sympathetic reviewers. The usual caveat applies and all the remaining errors and omissions are my sole responsibility.

² For an insider's perspective of the college textbook market, see Silverman (1991, 1995).

³ According to Lofquist (1995), the total sales of textbooks in the USA rose from $121 million in 1947, to $282 million in 1958, $734 million in 1967, and to $1.41 billion in 1977. By 1965, social sciences had become the largest category in terms of the number of book titles published in the USA and it has remained at the top during the rest of the twentieth century. Moreover, by the late 1970s economics and business were the fields with largest sales of textbooks (see Coser et al. 1985).

⁴ Several of the countries studied in these two volumes suggested the increasing influence of American textbooks, even in countries in which English was not widely spoken.

⁵ Although one of the initial motivations to the development of human capital research came via the relevance of education to the dynamics of economic growth and development (as in the work of T. W. Schultz), this strand of research ebbed away in the 1970s. However, by the mid-1980s the situation started to change. As it had happened in the 1950s, human capital benefited from the revival of growth research in the second half of the 1980s, notably due to the development of the so-called endogenous growth literature (Romer 1986; Krueger and Lindhal 2001). This more recent work challenged a certain mechanistic view that to a certain extent had proliferated in the early years of human capital research (Nelson and Phelps 1966). The strengthening of the relevance of human capital for economic growth had also to do with the developments regarding the role of technology and its impact in enhancing the demand for more and better qualified workers (Goldin and Katz 1998).

⁶ In terms of the adoption of textbooks, the forces can be mixed. On one hand, instructors, whose courses are already organized around that text structure, will also be resistant to reflect major changes, preferring incremental ones that can more easily be accommodated within the existing structure. However, this assumes that there is a stable faculty allocated to each course. Evidence has suggested that the rate of change in some fields can be high (Enz 1986), although this finding requires much more data. Moreover, since this is a lucrative market, publishers will be eager to increase their shares and therefore the number of options available in many fields is large.

⁷ Furthermore, Lester did not regard it as a minor issue. The preface to his second book says something particularly striking: “When I was writing the Economics of Labor, research and instruction on labor problems was almost exclusively the province of economists. Since then other social scientists have made significant contributions to our understanding of labor-management relations” (Lester 1951, viii). This is even more significant since at that time there was an increasing willingness among neoclassical labor economists to engage with the whole discipline and a growing discomfort with a multidisciplinary and eclectic approach to labour issues (see Teixeira 2007). By contrast, Lester saw industrial relations as the future home of economists interested in labour issues.

⁸ For instance, Brown's text (1962) completely overlooked human capital research. This did not come as a surprise if we bear in mind that he belonged to the so-called group of middle-ground neoclassics that included Reynolds, Lester, and others. In fact, the book presented the customary view among the group of the labor market as a complex and imperfect type of market, to whose problems the contribution of economics gave general answers – “possibilities rather than actualities” (4).

⁹ Rees has done his PhD in Labour Economics in Chicago (finished in 1950) and stayed in the department, having chaired it after T. W. Schultz between 1962 and 1965, before moving to Princeton. Together with other labour economists associated with the Chicago Department of Economics, such as Gregg Lewis and Melvin Reder, he would play an important role in making labour economics closer to neoclassical economics and to the broader discipline, that would pave the way to many younger labour economists interested in human capital (see Ashenfelter and Pencavel 2010).

¹⁰ One of the earliest chapters (the third) was devoted to “The Supply of Skill: Investment in Human Capital”, which dedicated extensive attention not only to schooling but also to on-the-job training. Most of the analysis is supported by references to Becker's book, with references as well to Schultz's AEA Presidential Address. Moreover, human capital analysis was not restricted to a specific chapter but rather it was propped up in several instances, such as in the discussion about the relevance of skills differentials to explain wage differences or the role of education in gender wage differentials or even the distribution of earnings. Unsurprisingly, references to Becker's work were numerous and that made him the most cited author in the whole textbook. Both Mincer and Schultz saw their work mentioned a couple of times, the former essentially because of his work on labour force participation and the latter on human capital topics.

¹¹ The much greater prominence given to human capital theory in this group of textbooks is not surprising given the way their authors position themselves about the field. For instance, in the preface to their book, Bellante and Jackson state that the main difference between their book and the others available is the fact that it “consistently uses a choice-theoretic or neoclassical approach throughout” (1979, xi), recognizing that it was “uncommon for labor textbooks” (1979, xi). However, they thought that those “whose training in labor economics has been obtained in the past two decades should feel more comfortable with this text” (1979, xi). Hence, the authors were not only acknowledging the changes in the field, but also that this created a market opportunity that would more unfailingly adopt a neoclassical approach to labor issues.

¹² This acceptance of human capital, although somehow reluctant, persisted in subsequent editions of Reynolds's textbook, then in co-authorship with Stanley Masters and Coletta Moser. In the case of its 10th edition (1991), one of the first chapters (the fourth) was precisely entitled “Human Capital: education and job training” and another (the sixth) was about “Investment by Firms in Workers”. The chapter on human capital included a few references to Becker's work, namely to his eponymous book, but these were mostly on footnotes (which could be partly justified by the fact that this was referring to more recent and specialized research that textbooks are not expected to privilege, especially at an undergraduate level). Both chapters also referred to Mincer's work, especially that on on-the-job training, and to the work by several other human capital researchers. However, the textbook also made numerous references to work that was critical of the human capital theory (notably the screening model), which were far more numerous and occupied a far larger space than that dedicated to human capital analysis.

¹³ As the title suggests, the focus of economic research on education is now much less interested in the educational system for its own sake, and much more on its interaction with the social-economic context in which it is embedded. The book analyses the benefits and costs of education from an individual and a social point of view and attempts to show that education is a profitable way of allocating society's resources.

¹⁴ Indeed, and for instance, Schultz had used human wealth instead of human capital in his initial writings, and even Becker hesitated about the title of Human Capital. The device seemed to have some effect since the foreword was written by a supportive Henry Villard (one of the Directors of the Ford Foundation), who just a few years earlier had been critical of Becker's first paper from the NBER project at the 1959 AEA meeting.

¹⁵ Representative examples are Charles Benson's The Economics of Public Education (1961) and Alice Rivlin's The Role of the Federal Government in Financing Higher Education (1961). These two books confirmed Mark Blaug's dictum that “the finance of education is perhaps the oldest and most developed branch of the economics of education” (1970).

¹⁶ Two of the most influential works were Frederick Harbison and Charles Myers's (1964) project on the role of manpower formation and planning for development and Samuel Bowles’ (1969) study of manpower planning in Nigeria (based on his PhD Dissertation for Harvard), both somehow connected with Chicago. Harbison had been a professor in Chicago until he moved to Princeton in the late 1940s, although his interest in education developed later and in connection with development issues. Bowles was actually lured to Chicago (by Schultz), who offered him a post-doctoral placement but he rejected it.

¹⁷ In that respect, the major role was played by Blaug, then one of the most enthusiastic supporters of human capital among the economics of education. He published his bibliography on the economics of education in 1966, updating it in 1970 and 1976. In the first edition, the volume contained roughly 800 items, in the second 1350, and in the third and last one just below 2000. In terms of readings, Blaug edited two volumes in 1969, both featuring prominently the human capital approach, although including other more traditional types of economics of education research such as educational finance. Another influential collection of readings was edited by Mary Jean Bowman (Chicago) with three other researchers in the field (Vaizey, Komarov, and Debeuvais) and published by UNESCO in 1968. It had the curiosity that it included texts from Russian economists reflecting on the economic value of education, published for the first time in English and in some cases dating back to the 1920s.

¹⁸ In Blaug's Economics of Education (1970), of the 10 chapters two were devoted to education as an investment, three to the cost/benefit analysis of education, and three to economic growth and educational planning matters. Cohn's text (1972) presented a similar picture. The issues of the internal working of the educational system and its finance received no more than two or three chapters.

¹⁹ The major effort in this respect was by Bernard Kiker, whose dissertation (finished in 1966) was mainly a retrospective study of the history of the discipline, searching for the economic role of education and training. Despite many interesting insights, including drawing the attention of disciplinary peers towards many overlooked or forgotten passages by the founding fathers, the book has a clearly whiggish flavour (his book was curiously titled Human Capital in Retrospect, 1968).

²⁰ In particular, Blaug discussed how much of the effect on earnings was because of education and how much other factors (screening, ability, and social origin). In his discussion, and despite concluding that the role of education seemed clear and important, he pointed out several problems in terms of the cost/benefit analysis: types of samples available, the size of consumption and nonpecuniary benefits, the impact of spillovers, and the debates on the marginal pricing of labor.

²¹ As Cohn puts it: “Some self-criticism is certainly in order, the objective being to improve both the theoretical and empirical foundations of our framework. Some of the critics, however, do not stop here. They contend that the entire framework is extremely troublesome. They conclude that no more effort should be expended in this area of study” (1975, 2nd edition; 230–231).

Additional information

Funding

This research has been supported by FCT the Portuguese Foundation for Science and Technology [grant number UID/CED/00757/2013].