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Human capital and our ill wind
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Photo by Lori Greig
One of the books that I am reading right now is titled Naked Economics and authored by Charles Wheelan. It is basic economics laid bare, if you will. It is easy to understand and a straightforward text about everyday economics in our society.
One chapter that I read a couple of weeks ago was about Human Capital. Human Capital could have two definitions, one micro and one macro. The micro definition would be about an individual. It is the sum of his or her abilities, skills, and efforts that make that person productive in society. Wheelan's example is Bill Gates. The reason he lives in a 37,000 square foot home with a twenty-eight car garage is because his personal human capital help create Microsoft and it made him very rich.
You might also say that Human Capital has a macro definition. It is the sum of everyone's individual human capital in a geographical area. So the total human capital in New Orleans would be different from in Houston or Keokuk, IA. Likewise, the human capital in the United States, even on a per capita basis, if far different from the human capital in Nigeria or China.
When an area or country has significant relative human capital, it can succeed even if it is resource poor. Japan and German are good examples. South Korea is another example, and look at the difference between South and North Korea. The north thwarts its human capital development with a political system that is oppressive.
The importance of human capital is one reason that I found James Gill's op-ed from Friday, September 25, 2009 so disconcerting. This is the most depressing quote in the piece, “Educated people keep moving out, while the untutored arrive in droves. At this rate, I could wind up among the top brains in the state. “ It is not depressing because Gill might not be as smart as he would like but because of the human capital ramifications.
It does not take genius to figure out that trading smarter, better educated people for the less intelligent and less educated does not bode well for the future of the area and the state. Add this to some other information in the article that the state rank 35th on one scale determining a business friend tax structure, and you don't have to have a crystal ball to see the future if something does not change.
I am a great believer in the marketplace. When the best move out of state and the state does not draw the best in return, it means the state is losing in the geographical marketplace, and it is an ill wind that is blowing our economic future south.
Let's hope that some key people with power to change the way that wind is blowing have not only read Gill's op-ed but knew about the problems long ago enough to be working on some solutions.
For more info: see this op-ed by James Gill
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