The curse of human capital
Posted April 10, 2008on:
Consider the ‘traditional’ capitalist (envisage the Monopoly™ man). This capitalist owns the means of production, such as a factory, or piece of machinery, a building, or piece of land. The capitalist uses their means of production to extract economic profit.
Times are changing. As we move towards a service based economy, like all other developed countries, increasingly the means of production take the form of human capital. Human capital is the capital that is built up within an individual, for example through education, on the job training and everyday work. The holder of human capital is herein referred to as the ‘modern’ capitalist (envisage a slimmer, more refined Monopoly™ person, possible black, possibly Asian, possibly a woman, possibly trans-gender – we don’t discriminate).
Human capital is the foundation of professional service firms, ranging from the glamorous, such as private sector economic consulting firms, to the pedestrian, such as lawyers and accountants.
But this trend towards human capital accumulation brings us to what I term the curse of human capital.
The traditional capitalist can employ others to operate their capital while still earning their rents. I’m referring to hiring Thai over-stayers to renovate and paint your housing stocks, or, for our sizeable USAmerican following (read sizable), paying illegal Mexican immigrants to pick your fruit. The modern capitalist has no such option. To extract rents from their capital they have one option: work. We know from our classical economic theory that providing labour (USAmericans, read labor) is an evil, albeit a necessary one, as it means we are trading off leisure time (a great source of utils).
We’re cursed, I tell you.