Moral Implications of Human Capital Theory in the History of Economic Thought

Abstract

Human capital theory states that investment in human capital, such as education or health care, creates returns like any other form of capital, such as increased productivity and maximization of wealth. The notion, however, has been consistently criticized by scholars as being inhumane; that putting people strictly in economic terms devalues the human and thus leads to immoral or harmful analysis and policy. An analysis of literature discussing the history of human capital theory allows for an understanding of how the theory has evolved in the history of economic thought since Adam Smith and his identification of people as the generators of wealth. Furthermore, the various objections that have been raised regarding the morality of the theory draw a contrast between Smith’s view of human capital and that of prominent contributors to economic thought during the twentieth century. Implications of human capital theory depend on one’s motive when using it, and improper applications of the theory result in immoral analysis of human beings. In this essay, I will compare Adam Smith’s valuation of human beings in Wealth of Nation with Gary Becker’s foundational work on the human capital theory published in the later twentieth century. Using Catholic Social Teaching as a basis for moral analysis, I will demonstrate the ways in which Becker’s utilization of human capital theory extend beyond its proper applications.