Reflections on Investment in Man

Abstract

T HE analytical scaffolding of these studies rests on the proposition that people enhance their capabilities as producers and as consumers by investing in themselves.It implies that not all of the economic capabilities of a people are given at birth, or at age fourteen when some of them enter upon work, or at some later age when some complete their schooling; but that many of these capabilities are developed through activities that have the attributes of an investment.These investments in people turn out not to be trivial; on the contrary, they are of a magnitude to alter radically the usual measure of the amount of savings and capital formation.They also alter the structure of wages and salaries and the amount of earnings relative to income from property.These alterations are clues to longstanding puzzles about economic growth, structure of relative earnings, and the distribution of personal income.Inasmuch as these alterations are a consequence of investment in human capital, 1 I am indebted to Larry A. Sjaastad and George J. Stigler for a number of helpful comments.