Human capital conceptualization: development and concept formation

Simona Potelienė, Zita Tamašauskienė

Abstract


The concept of human capital is an old one. Perhaps the first to try to define and measure what now is called human capital was Sir William Petty (1623-1687). The most prominent founder of the Political Arithmetic School of Economics and a forerunner of applied econometrics, Petty was concerned with the main national socioeconomic and political roles of human capital. He believed that labour was the “father of wealth” and that a measure of its value should be included in the estimation of national wealth. Petty’s thesis was that factors other than land and population were important in determining the wealth of a nation. Later, it was studied in works of Ph. Cantillon, J.H. von Thünen, A. Smith, A. Marshall, J.St. Mill, W. Farr, K. Marks, I. Fisher and other scholars.
At the end of the 19th and beginning of 20th centuries, there were formed two directions of economic thought, which discussed the definition of the “human capital” term. The representative of one direction scholars (A. Smith, F. List, J.B. Say, J.St. Mill, W. Rosher, W. Bagehot, N. Senior, H. Sidwick, F. List, G.Z. Walsh and others) considered that the capital is presented as inherited and possessed by man qualities and abilities, but they did not explicitly include human beings as capital. The representative of another direction scholars (L. Valras, G.M. Clark, H.D. McLeod, T. Witshtane, W. Farr, I. Fisher, N.W. Senior, H.D. McCleod, J.H. von Thünen, J.R. McCulloch, A. Marshal and others) defined the man himself as capital. Though they included human beings or their acquired skills and abilities in their concept of capital and saw investment in people as a means of increasing productivity, they did not use the concept for any specific purpose, nor did they try to estimate the stock of human resources in a quantitative sense.
However, as a special field of economic analysis, the theory of human capital was formed only at the frontier of the 60s – 70s in the 20th century, when J. Mincer (1958), R.B. Goode (1959), T.W. Schultz (1961) and G.S. Becker (1962, 1964, 1975) gave a different point of view regarding the concept and formation of human capital.
The results of the investigation have shown that human capital is a broad term and is treated very differently. Various authors emphasize one or another aspect of human capital, taking into account their specific research goals, challenges and context. Despite the proliferation of human capital definitions in the literature, a number of key elements seem to be common, encompassing knowledge, education, experience, health, competence, trained skills and endowed abilities.
Given the fact that numerous factors influence forming and exploiting human capital, these factors can be classified according to various scientific descriptors. These classifying descriptors include the following: a result of influence (positive/negative); a type of influence (direct and indirect); a type of influence in the process of renewing (intensive or extensive); a level of influence (macro/mezzo/microeconomic/ individual). In general, the factors that influence human capital formation can be grouped into 6 groups: (1) demographic (e.g., sex-age structure of population); (2) socio-demographic (e.g., the number of employed and unemployed population); (3) social (e.g., state of health and the level of culture, internal migration of the population); (4) economic, which is classified into factors of forming, supporting and developing (e.g., income devision according to the population groups) and factors, influencing on use efficiency (e.g., the general current economic situation); (5) organization-economic (e.g., the level of specialization, concentration and cooperation of production); and finally, (6) ecological (e.g., nature-climatic, sanitary-hygienic working conditions).

Keywords


human capital; historical development of human capital economic thought; human capital formalion

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DOI: http://dx.doi.org/10.13165/VSE-14-4-1-08

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"Business Systems & Economics" ISSN online 2029-8234