Knowledge v human capital
Posted by John Humphreys on March 3, 2007
It is important to draw a distinction between “knowledge” and “human capital”. Knowledge is the total amount of ideas available to an economy, independent of how many people know the ideas. This is the relevant factor for considering the changes and growth in the total capacity of an economy.
Human capital (like all capital) is important — but ultimately it cannot cause economic growth.
Education does not increase the total amount of knowledge in society. Education provides more human capital (by mixing pre-existing base resources with pre-existing knowledge) but it does not increase the amount of knowledge. If knowledge were to be held constant then we would move to a steady state of human capital with education equal to human capital depreciation, and no economic growth.
c8to said
correct…as far as growth caused by knowledge…which is the prime cause of growth…
but growth can actually happen independant of knowledge creation.
a growing population might lead to growth in per capita income with no new knowledge as economies of scale kick in without any change in human knowledge…this however is a trivial and probably uninteresting effect…