Monday, October 13, 2008

That's One Way to Measure Human Capital

Paul Collier writes in The Bottom Billion (a really good read by the way):

With a bit of imagination you can think of education as a form of wealth: in one of the ugliest phrases in economics, educated people are "human capital," so labeled because their skills are valuable.
I disagree with Paul. "Human capital" as not one of economics ugliest phrases, but rather one of the most beautiful. Typically, one thinks of capital as machines or buildings. Enlarging the concept of capital to include human capital means that one can invest in people as well as things. For those capitalists that aren't concerned with the social benefits of greater education, the concept of human capital gives them an hardheaded reason to invest in it.

The problem I have with human capital is that it is difficult to measure. I recently came across one unique way to measure it by Greg Mortenson, author of Three Cups of Tea: One Man's Mission to Promote Peace One School at a Time (another really good read by the way):
The biggest accomplishment I see in communities where girls become literate is profound—their hygiene improves dramatically, they tell me they only plan to have 2-3 children vs. their mother having 8-10 children, the infant mortality of children with literate mothers drops as the mothers are eager to seek out health care, and even the “networth” for a dowry for an educated girl in a rural village doubles and triples (example: An illiterate girl is “worth” about 5 goats or $300. An educated girl is “worth” at least $600 - $1000 in bride price).
Apparently in remote regions of Pakistan the increase in human capital of educating a girl is valued at 5-11 goats. I wonder what kind of ROI that works out to for fathers allowing their daughters to go to school?

This has me hopeful for a sequel to Three Cups of Tea: Five Additional Goats: The Quest to Increase Human Capital by Educating Girls.

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