In regione caecorum rex est luscus, [In the land of the blind, the one-eyed man is king]. This famous quote by Dutch author, philosopher, and scholar, Desiderius Erasmus, might be interpreted by an economist in this manner: In the land of the poor, (or rich for that matter), the productive man is king. In other words, he who has the most human capital; (skills, talents, perseverance, honesty, creativity, education, etc.), will lead a more comfortable lifestyle. In the book, Naked Economics, Charles Wheelan dedicates a chapter to discuss how human capital plays a key role in understanding why certain people are poor and what can be done about it.
An essential idea presented in the beginning of this chapter is that the labor market is no different from the market for anything else. In a labor market, a potential employee is trying to «sell» his or her talents and skills to an employer.
Napoleon Dynamite: Well, nobody’s going to go out with me!
Pedro: Have you asked anybody yet?
Napoleon Dynamite: No, but who would? I don’t even have any good skills.
Pedro: What do you mean?
Napoleon Dynamite: You know, like nunchuck skills, bow hunting skills, computer hacking skills… Girls only want boyfriends who have great skills.
Pedro: Aren’t you pretty good at drawing, like animals and warriors and stuff?
Napoleon Dynamite: Yes… probably the best that I know of.
Here we see that Napoleon recognizes the importance of good skills when trying to attract a member of the opposite sex. Just as an employee without any skills would not expect to be hired, Napoleon is certain a potential date would turn him away. But Napoleon’s chances of landing a date rise as he realizes he is the best artist of all the people he knows, (a unique skill an employee can market to set himself apart from other candidates). Employees (or singles) with a greater set of skills or a more unique set of skills will be in greater demand. By applying the basic economic principle of supply and demand we can infer that as the demand for certain skills goes up, so does the value of hiring an employee (or dating someone) with those skills. The opposite holds true as well, the less «human capital» an employee offers, the lower the wage he receives. This brings us to our first point: Poverty is due to a lack of skills, or human capital.
The rich are getting richer because they are becoming more and more productive, and the poor, well, they aren’t doing anything different. «Productivity is the efficiency with which we convert inputs into outputs,» and «human capital is inextricably linked — to productivity,» (pg 107). To be more productive, one must develop greater human capital. We observe «The poverty rate for high school dropouts in America is twelve times the poverty rate for college graduates,» (pg 101). A simple solution with complex implications is then suggested; higher education for these disadvantaged persons. The complex implications arise in trying to devise a policy that would enable the poor class to become more productive given that «Disadvantaged parents beget disadvantaged children,» (pg 106). These parents do not invest in the human capital of their children and thus make it difficult for the labor market to provide work for these persons.
«Our total stock of human capital-everything we know as a people-defines how well off we are as a society,» (pg 105). Although we haven’t eliminated poverty altogether, if we were to evaluate our entire nation, from poor-class to upper-class, we are doing extremely well at advancing our overall human capital, so much that the poverty line is now at a level of real income that was attained only by those in the top 10 percent of the income distribution a century ago. It may be true that in the land of the blind the one-eyed man is king, but we live in a nation where we all have the potential to see; some just choose to keep their eyes closed.
#Human #Capital #Napoleon #Dynamite
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