Editorial: Human capital and human capability

Abstract

I would like to comment on the connection as well as contrast between two distinct but related areas of investigation in understanding the processes of economic and social development: the accumulation of “human capital” and the expansion of “human capability.” The former concentrates on the agency of human beings through skill and knowledge as well as effort in augmenting production possibilities. The latter focuses on the ability of human beings to lead lives they have reason to value and to enhance the substantive choices they have. The two perspectives cannot but be related since both are concerned with the role of human beings, and in particular with the actual abilities that they achieve and acquire. Given her personal characteristics, social background, economic circumstances, etc., a person has the ability to do (or be) certain things that she has reason to value. The reason for valuation can be direct (the functioning involved may directly enrich her life, such as being well-nourished or being healthy), or indirect (the functioning involved may contribute to further production, or command a price in the market). The human capital perspective can in principle be defined very broadly to cover both types of valuation, but it is typically defined by convention primarily in terms of indirect value: human qualities that can be employed as “capital” in production in the way physical capital is. In this sense, the narrower view of human capital approach fits into the more inclusive perspective of human capability which can cover both direct and indirect consequences of human abilities. Consider an example. If education makes a person more efficient in commodity production, then this is clearly an enhancement of human capital. This can add to the value of production in the economy and also to the income of the person who has been educated. But even with the same level of income, a person may benefit from education, in reading, communicating, arguing, in being able to choose in a more informed way, in being taken more seriously by others, and so on. The benefits of education, thus, exceeds its role as human capital in commodity production. The broader human-capability perspective would record and value these additional roles. The two perspectives are, thus, closely related but distinct. The significant transformation that has occurred in recent years in giving greater recognition to the role of “human capital” is helpful for understanding the relevance of the capability perspective. If a person can become more productive in making commodities through better education, better health, and so on, it is not unnatural to expect that she can also directly achieve more and have the freedom to achieve more in leading her life. Both perspectives put humanity at the center of attention. Altogether, this involves, to a great extent, a return to an integrated approach to economic and social development championed particularly by Adam Smith (both in The Wealth of Nations and in The Theory of Moral Sentiments). In analysing the determination of production possibilities, Smith emphasized the role education as well as division of labor, learning by doing, and skill formation. The development of human capability in leading a worthwhile life as well as in being more productive is quite central to Smith’s analysis of “the wealth of nations.” Indeed, Adam Smith’s belief in the power of education and learning was peculiarly strong. Regarding the debate that continues today on the respective roles of “nature” and “nurture,” Smith was an uncompromising “nurturist,” and this fitted in with his massive confidence in the improvability of human capabilities: