Understanding Economic Development

Understanding Economic Development

A Global Transition from Poverty to Prosperity?

Colin White

This fascinating book considers one of the most important problems in economics: the inception of modern economic development. There is at present no satisfactory explanation of the inception of modern economic development; an excessive focus on either pure theory or on unique histories limits the explanatory power. This book realises the need to integrate the two approaches, moving beyond the proximate causes of economic theory to review the role in an analytic narrative of significant ultimate causes – geography, risk environments, human capital, and institutions.

Chapter 7: Human Capital: Education, Health and Aptitude

Colin White

Subjects: development studies, development economics, economics and finance, development economics


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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