By Michael Strong

The traditional interpretation of human capital is formal education leading to increased earning power.  But investments in human capital, in the broadest sense, are resources devoted in the present in the development of a human being that result in greater lifelong happiness and well-being.  Improved test score performance and degrees from accredited institutions are merely subsets of the beneficial results from human capital investments.

For instance, an investment that reduced the probability of premature violent death, teen pregnancy, incarceration, drug and alcohol addiction, etc. is an investment in human capital.  There is evidence that participation in some religious communities reduces the incidence of criminal behavior as well as various teen pathologies.  Investments that increase such participation increase in human capital.  Some religious communities also have better health statistics than the norm.  Participation in such communities is yet another form of human capital investment.

large_article_im4140_Human_CaptialAlthough academic elites routinely ridicule religious schools, those with Rawlsian predilections might transcend their loathing of such schools on the grounds that they improve the lives of the poor.  Very few of those who graduate from high school, marry, and get a job will experience chronic poverty.  If a religious school reduced the probability that a child would be among the chronically poor, it ought to be regarded as a wise choice.  (Research on voucher recipients selected at random from lotteries, most of whom attended religious schools, shows significant increases in college attendance among low income African-American students).

Martin Seligman, the leader of the positive psychology movement, notes:

The prevalence of depression among young people is shockingly high world-wide. By some estimates, depression is about ten times more common now than it was fifty years ago. . . . Depression now ravages teenagers: fifty years ago, the average age of first onset was about thirty. Now the first onset is below age fifteen. . . .

The epidemic of depression is part of a broader trend in the collapsing of adolescent well-being since the 1950s.  While deaths due to communicable diseases and injuries have decreased, suicides, homicides, substance abuse, pregnancy, venereal disease, and eating disorders have increased.

Meanwhile, William Damon, Director of the Stanford Center on Adolescence,

Research in the PYD (Positive Youth Development) developmental tradition has taken seriously the role of moral and religious beliefs in shaping children’s identities and perspectives on the future, and research has demonstrated a strong relationship between religious faith and at-risk children staying out of trouble.

As positive psychologists continue to validate ancient moral traditions (Consider Jonathan Haidt’s The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom), we should take seriously the notion that purposiveness and a moral tradition is crucial to adolescent happiness and well-being.

With respect to earning capacity, many high paying jobs are sales jobs and/or require high-level presentation skills.  Neither sales nor presentation skills are typically developed in traditional education.  They could be developed by a different approach to education – which would be another investment in human capital not measured by test score and degrees.  Reliability, punctuality, manners, responsibility, initiative, etc. are traits that are valuable in the market place.

Many entrepreneurs and tech industry leaders are high school or college drop-outs, including Richard Branson, Bill Gates, Michael Dell, and Steve Jobs along with dozens of less well-known billionaire entrepreneurs on the Forbes list.  “The Millionaire Next Door”cites research showing that the average American individual with a net worth of more than a million dollars was not a particularly good student – the most common profile is a “B” or a “C” student who owns a small business.  Most are not members of the educated elite.

HCMDespite these facts, some believe that correlations between income and education, success in school-as-we-know-it is crucial to professional success.  But when occupational licenses require educational credentials, the result is a system that legally mandates school as a prerequisite to professional success.  And occupational licensure has been growing for decades.  When all the tall-stalked dandelions are mowed down, after awhile “the empirical evidence” is that dandelion flowers tend to be low to the ground.  In addition, the ever-growing regulatory state favors big business.  Big business hires high-powered lawyers, accountants, and qu
ants.  The result penalizes business leaders whose competitive advantage consists of integrity and community spiritedness.  Over time these selection effects will result in a world in which increasingly the empirical evidence shows that educational level correlates with income.  To what extent are such correlations an artifact of the regulatory state?  We’ll never know.

Perhaps a market in human development, combined with occupational freedom, might provide more opportunities and greater well-being for the poor than does a regulatory state with government schools that require that everyone “pass” algebra and world history.  Suppose:

  1. The most powerful way to improve the lives of the next generation of the poor is by means of the effective transmission of valued cultural capital.
  2. The most important means of ensuring a greater degree of happiness and well-being in young people of all classes and ethnicities is by means of schools that provide a sense of meaning, purpose, and community.

Then an evolving system based on the preferences of parents which rewarded those educational entrepreneurs who do transmit valued cultural capital as well as creating schools based on meaning, purpose, and community will produce new forms of human development that more effectively achieve these goals.

Some educators are able to produce some outcomes more consistently than others.  Some of those educators will be able to transmit their ability to produce consistent outcomes to others.  In order for their work to scale with quality, they will need to create quality control systems that certify those teachers and schools which will also produce consistent outcomes.  These quality control systems will go by diverse brand names once we have a full-fledged market in education.  Because those brand names that produce consistent, desirable outcomes will receive more customers (students), they will grow.  Because they are growing, they will also receive more more financial support (capital investment in the case of for-profit entities, philanthropic support in the case of non-profit entities).  This will allow them to scale while also engaging in a process of continuous improvement and innovation with respect to their core competence.

This is the only means by which we will be able to scale and innovate systems that specialize in the development of “soft” skills, including design, creativity, entrepreneurship, relationship skills, “emotional intelligence,” personal responsibility, etc.  In culturally homogenous countries traditional cultural traits may be passed on by means of mass public education.  But in a large, culturally diverse country such as the U.S. in which cultural norms are diverse and changing, we need to develop systems that will allow for the most valuable forms of cultural capital to be transmitted and refined based on diverse parental preferences.



Posted by The Indian Economist