Human Capital

In economics, we often use the term human capital to refer to the skills and abilities that we can acquire to make ourselves more productive. The formation of human capital, is therefore, a result of our investment in education.

Human capital, is often seen as a homogenous factor of production, much like regular capital, which is not a homogenous mass either. This conception of human capital, was devised and was appropiate last century, when the skills companies most valued were reading, writing and arithmetic. Much like machines, humans were trained to operate in simple mechanical ways. But the world has changed a lot since then, everything than can be defined as mechanical can be done by machines, much better than any human could. Sadly, our educational system has not reflected this change, which in recent years has become so obvious to everyone.
Much of the blame, in my opinion, can be placed on the fact that education in today’s western societies is so heavily State controlled. As I argued in a previous post, such a centralised system of production, will struggle with innovation. This happens with healthcare and it happens with education.
It is not individuals, but State imposed regulations that require that kids be schooled from ages 4 to 16, an average of 25 hours a week, in classes of no more than 25 students, and most importantly, being taught a State appointed curriculum.
The contents of this curriculum, are decided by the currently appointed bureaucrats, and more often than not, are tainted with the political ideas of the ruling party.
Some might even say that a State run educational system, borders on endoctrination.
In any case, what this means, is that education, the formation of human capital, is not determined by the ultimate consumer. It is not the result of the decisions of each free individual, and this is precisely why this mismatch between demand and supply appears.
As a result, we live in a society of nineteenth century labourers, incapable of embracing the possibilities that new technology has to offer, incapable of understanding the new role of the human in the production process, and incapable, or at least limited, in their ability to acquire these new sets of skills. Today’s mosts successful companies list these as the most important qualities in an employee: problem solving ability, capacity to work in a group, and interpersonal communication.

The solution is simple. We must break free from the dogma of traditional, State run education. Education should be seen as an investment, and like with investment, and most things in life, one size does not fit all. Each parent and each person should attempt to regain autonomy of their education. To invest time and money into what he or she finds important and worthwhile.

Already the evidence on the matter is enlightening: in the U.S. around 4% of students are homeschooled. Results show that these students do better than 86% of their traditionally schooled peers.
In Spain, private schools boast of PISA results much higher than the national average, and often, at a lower overall cost too.

So take action now. Perhaps you cannot escape traditional education at this time, but you can always compliment it. And don’t let the boring school system dissuade you from learning, which is actually one of the most profitable and fulfilling things you can do with your time.


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