Integrating Human Capital with Human Development: Toward a Broader and More Human Conception of Human Capital

Abstract

For the most part, human capital theory, at least the version most economists have subscribed to, has emphasized human cognitive development and the acquisition of knowledge and skills that enable enhanced productivity and earnings. In light of recent research findings, particularly that concerning neurodevelopment and early childhood development, it is becoming apparent that this standard version of human capital theory has a far too limited conception of human capabilities and how they are created. This human capital theory is much too focused on cognitive learning and on relatively tangible contributions to productivity at work. It gives too little consideration to intangible, noncognitive aspects of learning. Also, it doesn’t sufficiently consider the role of parents and a variety of others who provide childcare and therapeutic help to children and adults. Moreover, it doesn’t consider recently accumulated knowledge related to the human brain’s functioning and development. Therefore, this paper proposes an integration of the human capital concept with the concept of human development. Some efforts in this direction have already taken place or are underway. Clearly, James Heckman and his collaborators are doing outstanding work, notably in the area of early childhood development. But in addition to those efforts, what is needed is a full-fledged integration of human capital (HC) and human development (HD), one that considers not only development over the entire life cycle but one that considers the full depth of human potential (human capabilities and disabilities). Such an integration of HC and HD can help us better understand what has to happen for individuals to flourish and to develop to their full potential. With the perspective of such an integration, we will be able to get a much more clear idea concerning the types of HC investment that have been relatively neglected, types that may turn out to have a relatively high rate of return. HD involves social, psychological, emotional, biological, cognitive, and other dimensions. Humans develop along a set sequence of steps involving a typical maturational path. If an individual’s environment is favorable, more or less full maturation may be attained, and the individual may reach his/her society sanctioned potential. However, in many cases in which the environment is not favorable, the individual may fail to negotiate the transition from a lower to higher stage of development or may get partially or fully stuck with respect to a particular phase of development. Arguably, these situations call for societal intervention, i.e., investments in HC, that enable the individual to accomplish the difficult development and move on to the next level. This conception of the HD process is much different than the standard HC view in which HC inputs (information, knowledge, etc.) are put into one end of the proverbial black box enabling capacity for producing higher output to emerge from the other end. Conceptually, the HD concept used here can be represented by a three sided pyramid. One side represents HD as a somewhat standard conception of HC formation. It shows an individual developing cognitively stage by stage along the usual educational path. A second side represents important noneducational stages in an individual’s psycho-social-emotional development, a path reminiscent of Maslow’s need hierarchy. The third side represents important steps in a person’s neurodevelopment. Using the HD pyramid, provides a useful perspective on an individual’s overall lifetime development. The pyramid conception arguably provides a useful guide to understanding how different types of investment in HC can help the person develop toward different aspects of their potential.