https://orcid.org/0000-0002-7128-8238
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Abstract
Human capital has become a popular concept in modern economics since the 1960s, though its historiography is still limited. Prior studies focussed on rational reconstructions, using earlier references to provide legitimacy to modern developments. In this text we take a different approach by tracing the evolution of the term and the (dis)continuities in its use. We analyse various contexts in which education and human capital were discussed during the first half of the twentieth century. The analysis underlines the complex stabilisation of the concept human capital, the loose connections among earlier debates and between those debates and modern economics.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 I am very grateful for the comments by the participants at the ESHET Annual Conference of 2019, namely those by Cléo Chassonnery-Zaïgouche. I am also very grateful to the two anonymous reviewers and to the editors of this special issue for their extremely helpful remarks and for their patience. The usual caveat applies.
2 This is vividly illustrated by the works of Kiker (Citation1966, 1968a, 1968b, 1969, 1974; Kiker and Cochrane Citation1973), who pioneered the efforts to document those earlier uses of the expression “human capital”. In his doctoral dissertation (Tulane University, 1965), significantly entitled Human Capital in Retrospect (and possibly influenced by Mark Blaug’s well-known 1962 textbook on the history of economics), he argued that it was possible to trace the development of human capital theory and emphasised the continuity of interests and the similarity of purposes between earlier and modern developments.
3 We will focus on the debates in the English and North American contexts as these are the most relevant to assessing the dissemination of the expression human capital among mainstream modern authors. An analysis of the economic relevance of education and the uses of human capital in other linguistic and cultural contexts is also very relevant but would require a separate study.
4 Fisher advocated general education to mitigate the risks of excessive specialisation, a remark that was somewhat reminiscent of Adam Smith’s concerns about the division of labour and the positive role of education in this respect.
5 In several passages of his Principles of Economics, Marshall emphasised the importance of promoting general education and advocated a better assessment of the pool of talents through increasing opportunities. In Marshall’s Industry and Trade (Citation1919), there were also several references to the economic role of education and training, notably their contribution to the efficiency of workers.
6 See Appendix (E) of Marshall’s Principles and the discussion of alternative concepts of capital. Many of these arguments would still be reiterated many years later by authors such as Corrado Gini (Citation1920, 1949), who, though using the term “human capital”, considered that it was unhelpful due to the practical difficulties with the valuation of such capital. For more details on Marshall’s reservations about the uses of the term human capital, see Blandy (Citation1967), Kiker (Citation1968b), and Bowman (Citation1990).
7 For an analysis of Nicholson’s writings, see Kiker (Citation1974) and Maloney (Citation1991).
8 Despite agreeing with the purpose, his approach was questioned by Victor Branford (Citation1901), one of the pioneers of British sociology, in the Journal of the Royal Statistical Society. He expressed reservations regarding the need to separate capital and wealth and the amount of human capital to be accounted in each of them (due to the different time horizons).
9 In Richard T. Ely’s (1900) Outlines of Economics, it was argued that increases in productivity would come mostly from new inventions and new resources and not from better-qualified labour. In Fetter’s (Citation1915) Economic Principles, the differences in people’s capacities were crucial for explaining the differences in wages, though it was hard to know how much of that was due to the impact of natural ability or training. For Hawtrey (Citation1926), the role of education was hardly linked to labour market activities and education was analysed in the context of the family and the supplementary role of the state. In Frank W. Taussig’s Principles of Economics (Citation1939), the analysis of the role of education and training in wages was rather cursory and loosely inspired by Adam Smith’s principle of compensatory differences. Moreover, the impact of education was mostly on the individual’s moral character, not unlike the prevailing view in classical political economy a century earlier (Blaug Citation1975; Teixeira Citation2007a).
10 This issue had already been raised a few scattered times during the late nineteenth century, such as in the work of William Farr (Citation1885), who argued that the most important part of the capital of the United Kingdom was the economic value of the population, which was greatly influenced by the skills acquired through education.
11 This was based on his thesis on public health submitted to the University of California.
12 A relevant contribution to this issue was made by Pareto (Citation1905) in the Giornale degli Economisti, in which he discussed the economic value of humans and the cost of migration, though he did not use the expression human capital.
13 It is nevertheless striking that, in the same article, he omitted education from the chief factors determining human capital.
14 Early reservations had already been expressed by Giffen (Citation1904) in one of the earliest attempts to calculate the costs of war. In his study on the costs of the Franco-German war of 1870–1871, he discussed the loss of life in the context of indirect costs and presented an overall loss based on an arbitrary average value of annual earning power. Hence, he excluded it from the indirect costs and from the summary of the costs of war altogether for the two countries involved.
15 This organisation had been established in 1910 by a huge donation by Andrew Carnegie to promote international cooperation and active international engagement by the US.
16 This initiative supported the publication of 132 volumes (of the 150 initially planned) until its suspension in 1933 (Barber Citation1991).
17 The persistence of the war would make a pacifist attitude more difficult to sustain, especially after America’s declaration of war in April 1917. For more details of his activities in this respect, see Barber (Citation1991).
18 References included authors such as William Petty, Robert Giffen, Yves Guyot, Edgar Crammond, Maurice Barriol, J.S. Nicholson, and Alfred Marshall.
19 In this respect, he made extensive use of the work of Dublin and Lotka published in the American Journal of Public Health (1927) and in the Statistical Bulletin of the Metropolitan Life Insurance Company (1926).
20 This may be due to the fact that the novelty of cost–benefit analysis was no longer significant and that economists were far more involved in the war effort in several instances (Barber Citation1991; Backhouse Citation2010). For a detailed analysis of the use of cost–benefit analysis in public administration and military forces in the US, see Porter (Citation1996).
21 For more details of the historical development of actuarial practices, see Porter (Citation1996) and Bannister (Citation2003).
22 One of the main authors was the German economist Ernst Engel (Citation1883), who built on an important contribution by Theodor Wittstein (Citation1867). Mention should also be made of the work of the French economist Auguste Barriol (Citation1910, 1911).
23 This was part of a collection of studies coordinated by Huebner analysing various economic and social aspects of life insurance.
24 The reflections about the value of human life were also associated with discussions about the cost of diseases. C. H. Forsyth (Citation1915) attempted to measure the loss associated with various diseases, and their consequences in terms of the average length of human life, the expectation of life, and the death rate.
25 In one of the most interesting pieces, Dublin and Lotka discussed “The Money Value of Life and Life Extension” (Citation1928), presenting arguments about the economic value of humans and the returns from investment in human capital.
26 It is noteworthy that the contribution of Fisher was acknowledged in the preface and his scientific authority was used to give legitimacy to their work.
27 “When the child reaches maturity the laws of society make him a present of himself, in other words he becomes his own boss. He is thus presented with a more or less considerable amount of capital invested in him during his years of minority, which he possesses from thence forth in his own right. Any income which he can command in return for the investment or use of that capital – we shall call it human capital – is regarded as his own. The worker, in so far as he devotes his body and mind, his time, presence, strength and skill to a productive enterprise, is thereby and in such measure investing his store of human capital. The return for this peculiarly vital investment is commonly known as wages” (Reed Citation1925).
28 One example of the use of human capital in social debates was provided by the British economic historian R. H. Tawney (Citation1909). On the occasion of reports on the Poor Laws and the attendance at continuation schools, he considered that these working experiences were driving children to a pattern of non-qualified and precarious occupations at a time when they should still be developing their skills to enhance their future employability and earnings. This type of labour therefore represented short-sighted use of what he called the country’s human capital. This would later be developed in his work on education as major leverage for social change and for creating opportunities for individuals, especially those from poorer backgrounds (Tawney Citation1938). Along the same lines, Marshall (Citation1919) in his Industry and Trade praised the positive effects of the education and factory acts, which had removed a great evil from factories by restraining the use of child labour. This made a lot of economic sense because on the one hand, there was decreasing demand for the kind of tasks previously developed by child labour (nowadays done by machines); on the other hand, the increasingly better education methods would strengthen the children’s capacities making them better workers in the future.
29 In the US, the establishment of the NBER in the early 1920s had been an important step in giving greater visibility to income distribution issues, and it is noteworthy that the first study developed by the NBER was devoted to the quantification of American income and its distribution (Mitchell et al. Citation1921–1922). This was further strengthened with the establishment by the NBER of the Conference on Research in Income and Wealth in 1936. Nonetheless, most of the work undertaken in that context was focused on conceptual and methodological issues of the measurement of income rather than on the development of explanations for income inequality (Teixeira 2007b).
30 For instance, that was also the meaning ascribed to the population in references published in scientific journals outside economics, such as in Science (Citation1943), the British Journal of Delinquency (Lopez-Rey Citation1954), the British Medical Journal (Grant Citation1948; Dalal Citation1944), the Social Service Review (Goldmann Citation1955), and the Canadian Public Health Journal (Gregoire Citation1941).
31 Wang (Citation1955, 44) pointed out that, “In speaking of capital expenditures, we are excluding human beings as capital – a legitimate procedure from the point of view of statistical classification. From the point of view of investment for economic development, the statistical convention often obscures real impact of given expenditures; for current expenditures on health and education may be considered as investments for a better educated and more healthy population in the future and may legitimately be regarded as capital accumulation rather than consumption, or indeed as a special category having a dual consumption–investment characteristic. If the above consideration is taken into account, the composition of social expenditures will have to be adjusted accordingly”.
32 For an analysis of Schultz’s contributions to human capital, see Bowman (Citation1980), Teixeira (Citation2010), and Chirat and Le Chapelain (Citation2020)
33 These included Joseph Willet’s (University of Chicago) doctoral dissertation on growth, Selma Mushkin’s work on health economics, Gary Becker’s (also from the University of Chicago but then from the University of Columbia) research on human capital and on-the-job training, Morton Zeman’s (University of Chicago) doctoral dissertation on income differentials by ethnic group, and Jacob Mincer’s (University of Columbia) doctoral dissertation on human capital and income distribution.