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Human Capital is Becker's classic study of how investment in an individual's education and training is similar to business investments in equipment. Recipient of the 1992 Nobel Prize in Economic Science, Gary S. Becker is a pioneer of applying economic analysis to human behavior in such areas as discrimination, marriage, family relations, and education. Becker's research o Human Capital is Becker's classic study of how investment in an individual's education and training is similar to business investments in equipment. Recipient of the 1992 Nobel Prize in Economic Science, Gary S. Becker is a pioneer of applying economic analysis to human behavior in such areas as discrimination, marriage, family relations, and education. Becker's research on human capital was considered by the Nobel committee to be his most noteworthy contribution to economics. This expanded edition includes four new chapters, covering recent ideas about human capital, fertility and economic growth, the division of labor, economic considerations within the family, and inequality in earnings. "Critics have charged that Mr. Becker's style of thinking reduces humans to economic entities. Nothing could be further from the truth. Mr. Becker gives people credit for having the power to reason and seek out their own best destiny."—Wall Street Journal


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Human Capital is Becker's classic study of how investment in an individual's education and training is similar to business investments in equipment. Recipient of the 1992 Nobel Prize in Economic Science, Gary S. Becker is a pioneer of applying economic analysis to human behavior in such areas as discrimination, marriage, family relations, and education. Becker's research o Human Capital is Becker's classic study of how investment in an individual's education and training is similar to business investments in equipment. Recipient of the 1992 Nobel Prize in Economic Science, Gary S. Becker is a pioneer of applying economic analysis to human behavior in such areas as discrimination, marriage, family relations, and education. Becker's research on human capital was considered by the Nobel committee to be his most noteworthy contribution to economics. This expanded edition includes four new chapters, covering recent ideas about human capital, fertility and economic growth, the division of labor, economic considerations within the family, and inequality in earnings. "Critics have charged that Mr. Becker's style of thinking reduces humans to economic entities. Nothing could be further from the truth. Mr. Becker gives people credit for having the power to reason and seek out their own best destiny."—Wall Street Journal

30 review for Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education

  1. 5 out of 5

    Rafael De Anda

    Education meets economics. Dr. Becker explains these theories thoroughly and also uses calculus for those who appreciate calculus.

  2. 5 out of 5

    Todd

    Overall a pioneering work; Becker considers investments in people as "capital" and then explores the implications therefrom. He seeks to show that such investments are, in the main, made rationally, just like other types of investments. He attempts to compare and contrast a number of factors, whether native intelligence, environment, race, sex, region, level of overall development in a given country, etc. He also attempts to look at whether there can be over-investment in human capital and conse Overall a pioneering work; Becker considers investments in people as "capital" and then explores the implications therefrom. He seeks to show that such investments are, in the main, made rationally, just like other types of investments. He attempts to compare and contrast a number of factors, whether native intelligence, environment, race, sex, region, level of overall development in a given country, etc. He also attempts to look at whether there can be over-investment in human capital and consequent diminishing returns. He looks at life cycles and a broad array of other factors and considerations. In short, Becker considers any activity that influences "future monetary and psychic income by increasing the resources in people" as an investment in human capital. (location 408-409) The work can be read by the layman, who will understand Becker's overall theory easily enough. However, much of the work does rest on a multitude of advanced mathematical formulae. While the layman can skim over these and benefit from the work, he or she will be unable to refute or redirect the finer points as established by Becker's mathematical approach without a more technical understanding. Insofar as his overall theory goes, Becker establishes a strong case and defends it logically. However, his empirical work is subject to a good deal less confidence. In particular, the data sets he used for his earlier work (this book is a collection of work published over a span of decades) were not robust enough for the sort of analysis he wished to do. So Becker was forced to make a great many assumptions and some arbitrary adjustments to some of the data to "correct" them. Why would one "correct" 1939 for the unusually high unemployment at the time? After all, unemployment is one of the risks of investing in human capital; it has happened to some that they incurred debt, saved money, passed up other opportunities, earned a college degree, then found the labor market in their sector unusually weak for a period of time. To Becker's credit, he is painfully transparent as to his assumptions, the data used, and how he used it; there is no sleight of hand here. Some of the gymnastics Becker engaged in, especially when working with his 1940 and 1950 data sets, would seem to confirm Murray Rothbard's general criticism of mathematics applied to economics, particularly as Becker ends up drawing definitive conclusions based on some hair-splitting differences in mathematical outcomes based on his legion of formulae that, after all, were originally based on these flawed, incomplete, "corrected" data sets. This is a shame, as Becker's use of mathematics in other contexts could be taken as a rejoinder to Rothbard's criticism; that is, when Becker more humbly uses mathematical outcomes to direct his theoretical inquiry and further empirical research. Some of Becker's findings will seem non-controversial, even common-sense. He notes the disastrous consequences of not finishing high school, for instance. Also: The higher earnings of, say, college graduates compared to high-school graduates are partly due to the college graduate's greater ability, ambition, health, and better educated and more successful parents. I concluded from an examination of several kinds of evidence that differences in these and related traits explain a relatively small part of the earnings differentials between college and high-school graduates (but a larger part of the differentials at lower education levels). (location 361-364 Many of Becker's conclusions have clear policy prescription implications, though Becker seldom follows through and makes that leap in favor of or against particular policies, regardless of how plain he makes the connection up to that stage. Some such points: few if any countries have achieved a sustained period of economic development without having invested substantial amounts in their labor force (location 423-424) inequality in the distribution of earnings and income is general positively related to inequality in education and other training. (location 425) labor markets cannot do much for school dropouts who can hardly read and write and never developed good work habits, and why it is so difficult to devise policies to help these groups. (location 580-581) Becker notes that in a subsistence economy, there is an incentive for parents to have many children and invest little in their training or education, as they will be fully productive members of such an economy without needing much training and will be able to begin adding to the family income by working (rather than deferring work for education) at a relatively young age. Conversely, he notes that in a developed economy, parents are incentivized to have fewer children (as their own foregone opportunities, as well as outright expenses, increase with each child) and equally incentivized to invest more in their education. Further, the returns on education seem to increase rather than diminish in more advanced economies, as "The systematic application of scientific knowledge to production of goods has greatly increased the value of education, technical schooling, and on-the-job-training." (location 628-629) Becker analyzes the problems of investing in capital markets. In the first instance, the investment and its returns are inalienably tied to the person, and there is great uncertainty about people, especially younger people, in terms of their potential, their work habits/ethics, their length and quality of their lives, etc. Additionally, absent slavery, a person makes poor collateral on loans made for his/her education or training. Therefore, it more often falls to people to self-finance investments in human capital except where a particular person/firm/etc. can benefit reliably and directly from such investments, such as improvements to health or morale leading to short-term improvements in productivity, training in knowledge specific to a particular firm, etc. Becker notes that overregulation makes access to capital even more difficult and expensive: "The supply curve to an individual investor is positively inclined because the segmentation in the market for human capital forces him to tap more costly funds as he expands his capital investment." (location 2562-2563) Speaking of segmentation, Becker disappointingly considers government funds as "free" as he completely neglects to consider the source of the funds, making one of the simplest errors highlighted by Frédéric Bastiat. Obviously, people pay the cost of government funds, plus, of course, the cost of running whatever government apparatus is involved in collecting, spending, directing, auditing, etc., those same funds. While the person tapping the funds may not be paying the full amount in (i.e., education subsidies for the poor), it is not as if even the poor do not pay tax. They are subject to sales tax and others levied directly on them, plus they end up paying other taxes passed along by higher prices. (Understanding that Rothbard and others have attempted to refute the idea of passing along tax costs, in fact, a quick review of IBTimes' map of cigarette taxes versus cigarette prices reveals this to be patently false: http://www.ibtimes.com/price-cigarett....) However, Rothbard's (and Milton Friedman's and others') criticism about the lack of efficiency whenever the beneficiary is disconnected from the payer of a given service would seem to hold for this approach. Becker pays lip-service to this notion when he admits "Obviously, 'free' state and municipal colleges use scarce resources and are not free to society." (location 3421) However, his overall usage in the book seems to disregard this. Another finding (although this is one of those depending on Becker's more suspect data sets) also has implications for continuing debates about how to handle education: Foregone earnings account for about 74 per cent of the total [of attending college], tuition and fees for only about 17 per cent, and other direct costs for the remaining 9 per cent. Therefore, if tuition and fees alone were eliminated--if colleges were made "free" in the usual meaning of this term--only a relatively small part of the private burden of attending college would be eliminated. That is to say, even at the private level "free" colleges are not really very free after all! (location 2859-2863) Becker analyzes differences in native ability versus differences in environment and concludes "much of the large apparent return to primary and secondary school education does result from differential ability." (location 2954) This, of course, deflates any egalitarian arguments about equality of outcomes as an achievable goal, though, as usual, Becker refrains from making any such leaps himself. Becker notes that workers with a high level of knowledge/experience specific to a particular firm are less likely to be laid off during a downturn, as the firm likely bore more of the expense of providing such, whereas unskilled workers or workers with skills and experience useful in a general sense are more likely to be let go, as they are easier to replace and the firm has less it invested in them. Conversely, Becker sees a more general education as hedging against changes that might make more specific educations obsolete before they can return on investment: "This long payoff period provides an economic justification for flexible or 'liberal' education since most of the benefits would be received when the economic environment was greatly different from that prevailing at the time of entry into the labor force." (location 3949-3951) In looking at the differences between children of rich and poor and how that impacts their education and later earnings, some of Becker's findings are as you would expect them (the rich are generally at an advantage), though some might be surprising. For instance, if a child is expected to be rich regardless of his/her effort, education is a waste of money and this tends to lower expenditures on it. Also, many government programs intended for the poor have a weaker than expected effect because people benefiting from such programs often compensate by spending their own money they would have put toward children's education toward other things instead. He noted that over time, both rich and poor tend to regress toward the mean, showing that affluence or poverty affect long-term outcomes less than expected, except where significant discrimination on the base of race, sex, caste, etc., is present. For instance, "a 10% increase in father's earnings (or income) raises a son's earnings by less than 2%." (location 4537-4538) Another interesting point raised is that "a progressive income tax could raise the long-run relative inequality in after-tax income. The standard deviation clearly falls, but average incomes also fall eventually because parents reduce their bequests to children." (location 4698-4699) Although Becker does not extend his argument further, one wonders whether the "death tax" on the inheritances of the rich does not also follow this pattern of eventual downward trends across a broader population. Becker takes an interesting look at specialization, revisiting Adam Smith's notion that the size of the market limits the extend of specialization. While that clearly holds as an absolute limit, Becker finds that other factors tend to limit specialization within a narrower range still. Principally, Becker notes the "costs of coordination" can limit specialization, whether that be conflict between ostensible team members, communication problems, shirkers, hold-outs, etc. A good reminder to us today when considering whether a centrally-planned or market-based approach resolves this problem better: Economic systems that encourage entrepreneurship would have lower costs of coordination, and presumably a more widespread division of labor among workers and firms. Since centrally planned economies throttle entrepreneurship as well as weaken the capacity of markets to coordinate transactions, workers and firms should be less specialized in these economies than in market economies. (location 4961-4964) When considering life cycle, Becker interestingly found that people's earnings actually tend to keep going up until retirement, rather than peak and start coming down first. The apparent curve showing the latter represents, instead of one persons own life cycle, the trend for younger generations to earn more than older ones as economies develop, giving that appearance. Becker asserts that "too little attention to accidents and good fortune" (location 5320) has been given in analyzing the success or failure of various countries over time. However, he would benefit from reading Jared Diamond's Guns, Germs, and Steel: The Fates of Human Societies. If one were to look at Europe, Persia, India, and China in 1500 and guess which would be the predominant power over the next 500 years, Europe would likely have come last on the list. It had no accident or good fortune on its side at that time. However, as Diamond concluded, its very diversity, while leading to conflict, also permitted a level of innovation absent in ossified China and the other major contenders of the time. In terms of format, the tables, graphs, and formulae are readable on my Kindle, but they are usually unreadable on the Kindle app in my smart phone. Additionally, more than a few times, while turning the page on my Kindle, it jumped instead to a very different part of the book, so beware unexpected jumps while reading. Overall, I do recommend the book. If nothing else, Becker shows himself a pioneer. While he admits he is not the first to consider human capital, and gives credit where credit is due, his ambitious scope, span, and depth are breathtaking. His conclusions may not be as well-supported as his math leads one to believe owing to defects in his data sets, but his attempts to address so many interesting and even urgent questions certainly will lead the way to better data collection and a more rigorous analysis of it in the future. Even with what he has available to work with, many of his insights are significant and some are quite surprising. Anyone with an interest in economics, education and training, or humans beings as a positive factor, would benefit from reading it. Those with a strong math background would benefit more, but all can read and get something from the work.

  3. 4 out of 5

    dv

    Pubblicato nel 1964 (anche se rivisto e integrato fino al 1993) è uno dei primi casi in cui l'espressione "capitale umano" è stata trattata compiutamente, analizzando con strumenti economici l'incidenza dell'investimento in acculturazione personale sul guadagno economico. Va tenuto presente che si tratta di un testo squisitamente economico, che non solo potrebbe risultare indigesto per molti ma anche suonare a tratti troppo teorico o distante (per la situazione che analizza e per gli anni in cui Pubblicato nel 1964 (anche se rivisto e integrato fino al 1993) è uno dei primi casi in cui l'espressione "capitale umano" è stata trattata compiutamente, analizzando con strumenti economici l'incidenza dell'investimento in acculturazione personale sul guadagno economico. Va tenuto presente che si tratta di un testo squisitamente economico, che non solo potrebbe risultare indigesto per molti ma anche suonare a tratti troppo teorico o distante (per la situazione che analizza e per gli anni in cui si muove) e in ogni caso lontano dai modi più "light" in cui successivamente il capitale umano è stato trattato.

  4. 4 out of 5

    Richard Marney

    A technical read, covering the concept of enhancing knowledge and skills in workers (human capital) through education and training to increase productivity in an analogous manner to research and development/ fixed capital investment to expand productive capacity of plant and equipment. The author’s ( a Nobel Prize laureate ) contribution to our understanding of productivity growth has diverse applications, including the field of labour economics and inequality. In the latter area, his work allow A technical read, covering the concept of enhancing knowledge and skills in workers (human capital) through education and training to increase productivity in an analogous manner to research and development/ fixed capital investment to expand productive capacity of plant and equipment. The author’s ( a Nobel Prize laureate ) contribution to our understanding of productivity growth has diverse applications, including the field of labour economics and inequality. In the latter area, his work allows us to understand better the need for government to address the educational prerequisites of low-income and other disadvantaged members of the community.

  5. 5 out of 5

    Chris Nagel

    The butler did it. I recently heard a story, probably on Market Place on American Public Media, that referred to the way we rely on higher education to produce workers. It reminded me of Becker's now quite old work on this, because it appeared that the economist being interviewed had "discovered" the connection between higher education and people's chances for reasonably tolerable working lives--you know, about 50 years after Becker's analysis. The butler did it. I recently heard a story, probably on Market Place on American Public Media, that referred to the way we rely on higher education to produce workers. It reminded me of Becker's now quite old work on this, because it appeared that the economist being interviewed had "discovered" the connection between higher education and people's chances for reasonably tolerable working lives--you know, about 50 years after Becker's analysis.

  6. 4 out of 5

    Dennis

    A must-read for any economist.

  7. 4 out of 5

    Jason

  8. 4 out of 5

    Adam

  9. 5 out of 5

    Monica

  10. 5 out of 5

    Adolfo L.

  11. 5 out of 5

    Matthew

  12. 5 out of 5

    Mary

  13. 4 out of 5

    Gibran

  14. 5 out of 5

    Aditya

  15. 4 out of 5

    Decorticate

  16. 5 out of 5

    Laura Camomile

  17. 5 out of 5

    Andrew

  18. 5 out of 5

    Catalina

  19. 5 out of 5

    Janvi Ingale

  20. 4 out of 5

    Galuh

  21. 4 out of 5

    Conrado

  22. 4 out of 5

    Jan Michael

  23. 5 out of 5

    Alyse

  24. 4 out of 5

    Matthew

  25. 5 out of 5

    Alex Foti

  26. 4 out of 5

    Zoran Jezic

  27. 5 out of 5

    Bálint

  28. 5 out of 5

    Kalle Wescott

  29. 5 out of 5

    Catherine

  30. 5 out of 5

    Anastasya Saykova

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