Equality in the age of human capital

Three quarters of America’s wealth is invested in its people, writes Gary Becker (PDF 26KB). He argues that while physical capital is still matters, human capital now matters more. Where once a nation’s wealth lay in the fertility of its soil, today it lies in the knowledge, skills and health of its population. The increasing interest in human capital has had a profound impact on the politics of egalitarianism. How do you redistribute wealth if it isn’t something people have but is part of who they are?

How much are you worth?

In his Treatise on the Family, Becker writes about the “quality” of children. High quality children are able to benefit from future investments in education and, as adults, are likely to command a high price in the labour market. Low quality children are more likely to struggle at school and are likely to graduate to low-paid unskilled work (or dependence on welfare). Becker’s definition of quality is uncannily similar to Thomas Hobbes’ definition of worth:

The value or worth of a man is, as of all other things, his price; that is to say, so much as would be given for the use of his power, and therefore is not absolute, but a thing dependent on the need and judgment of another.

In the language of human capital, people are commodities. Each of us is an elaborately transformed good - the product of the raw material of our genes, our diet, our upbringing, and our education. Human capital isn’t something that we have, it’s who we are. It’s almost impossible to imagine ourselves without the human capital we’ve developed since we were born. To do that, is to imagine ourselves as different people.

The poor are different

Educational attainment is one of the clearest markers of human capital. Researchers sometimes use it as a proxy for socioeconomic status. In a recent post, Ezra Klein points to a new study showing that highly educated Americans are far less likely to die prematurely than poorly educated Americans. He slides effortlessly from this finding about low educational attainment into a discussion about poverty:

… the poor are not just different because they have less money, but because their lives are substantially worse, and worse in ways that better social policy could help alleviate.

Klein’s commenters were quick to speculate about how the poor might be different. Sancho pointed to a quote by one of the researchers: "The trend is best explained by tobacco, obesity and high blood pressure". Sancho’s conclusion was that poor people were making themselves unhealthy. Another commenter, MFA, suggested that poor people were incapable of making healthy choices:

The poor receive low-quality education. They grow up in environments that retard both physical and mental development. As a result they are less likely to properly assess the risks of the behavioral choices they make.

At The Fly Bottle, Will Wilkinson argued that lack of education and poor health had a single cause - time preference. Getting an education means sacrificing time and income in the short term in order to reap larger benefits in the long term. In the same way maintaining good health means sacrificing junk food and indulging in exercise now in order to reduce the risk of death and disease later.

In a review of the literature (PDF 252KB), economist James Heckman writes that, "Cognitive and noncognitive skills - self-regulation, motivation, time preference, far-sightedness, adventurousness and the like - affect the evolution of health capital through choices made by parents and children." He argues that many of these skills develop during early childhood and form the foundation for later learning. Children who miss out on these early opportunities for development are unlikely to benefit from the kinds of education and training that could give them access to high income jobs as adults.

Heckman’s solution is to create programs specifically targeted at children from disadvantaged backgrounds. In contrast to thinkers like Peter Saunders (CIS) who focus on intelligence, Heckman argues that: "Enriched early intervention programs targeted to disadvantaged children have had their biggest effect on noncognitive skills: motivation, self-control and time preference."

Saving Epponnee-Rae

These research findings on early childhood create a dilemma for egalitarians. On the one hand, the research suggests that publicly funded investments in early childhood could significantly improve the well being of children from disadvantaged families. But on the other hand, they seem to be stigmatising less educated adults - particularly those who are unable to work and depend on welfare benefits. The poor are portrayed as underdeveloped human beings - ignorant, lethargic and unable to control their impulses. Worse still, their parenting practices have been identified as an important cause of intergenerational disadvantage.