Chapter 7: Human Capital: Education, Health and Aptitude
It is a truism to say that modern economic development results from the acts of human beings, but the statement has real meaning. Destroy all the physical capital, burn all relevant technical blueprints, and the human beings of developed societies will bounce back, although without outside assistance, it might take some time to achieve. This is exactly what happens after major wars. What is now commonly called human capital is the key. Endogenous growth models have focused on the positive relationship between a country’s growth rate and its stock of human capital. Recent theoretical analysis stresses the need to incorporate into the inputs of the neoclassical production function an allowance for human capital, either as a separate item or as part of one of the other factor inputs – labour or an expanded capital input, thereby combining the investment in people with the investment in machines. The two types of investment are often complementary and linked by technology, which requires investment in both. The various elements which increase human capability – education, health and aptitude – are factors of ultimate causation, influencing the proximate cause, the input of labour. Also relevant are the motivation of decision makers, including the culture, or attitudes and beliefs, which influence that motivation, and the opportunities available for the employment of human capital. A society endowed with individuals of good motivation and health, with attitudes which favour the kind of behaviour which promotes economic development and aptitudes which assist in solving the problems thrown up by economic development,...
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