HUMAN CAPITAL AND HUMAN CAPABILITY

 HUMAN CAPITAL AND HUMAN CAPABILITY                                                                                                                                                                                                                 1. At the risk of some

oversimplification, it can be said that the literature on human capital

tends to concentrate on the agency of human beings in augmenting

production possibilities. The perspective of human capability focuses, on

the other hand, on the ability—the substantive freedom—of people to

lead the lives they have reason to value and to enhance the real choices

they have. The two perspectives cannot but be related, since both are

concerned with the role of human beings, and in particular with the

actual abilities that they achieve and acquire. But the yardstick of

assessment concentrates on different achievements.

Given her personal characteristics, social background, economic

circumstances and so on, a person has the ability to do (or be) certain

things that she has reason to value. The reason for valuation can be

direct (the functioning involved may directly enrich her life, such as

being well-nourished or being healthy), or indirect (the functioning

involved may contribute to further production, or command a price in

the market). The human capital perspective can—in principle—be

defined very broadly to cover both types of valuation, but it is typically

defined—by convention—primarily in terms of indirect value: human

qualities that can be employed as “capital” in production (in the way

physical capital is). In this sense, the narrower view of the human

capital approach fits into the more inclusive perspective of human

capability, which can cover both direct and indirect consequences of

human abilities.

Consider an example. If education makes a person more efficient in

commodity production, then this is clearly an enhancement of human

capital. This can add to the value of production in the economy and also

to the income of the person who has been educated. But even with the

same level of income, a person may benefit from education—in reading,

communicating, arguing, in being able to choose in a more informed

way, in being taken more seriously by others and so on. The benefits of

education, thus, exceed its role as human capital in commodity

production. The broader human-capability perspective would note—and

value—these additional roles as well. The two perspectives are, thus,

closely related but distinct.

The significant transformation that has occurred in recent years in

giving greater recognition to the role of “human capital” is helpful for

understanding the relevance of the capability perspective. If a person can

become more productive in making commodities through better

education, better health and so on, it is not unnatural to expect that she

can, through these means, also directly achieve more—and have the

freedom to achieve more—in leading her life.                                                                                                                                                                                                                                        2. There is, in fact, a crucial valuational difference between the humancapital focus and the concentration on human capabilities—a difference

that relates to some extent to the distinction between means and ends.

The acknowledgment of the role of human qualities in promoting and

sustaining economic growth—momentous as it is—tells us nothing about

why economic growth is sought in the first place. If, instead, the focus is,

ultimately, on the expansion of human freedom to live the kind of lives

that people have reason to value, then the role of economic growth in

expanding these opportunities has to be integrated into that more

foundational understanding of the process of development as the

expansion of human capability to lead more worthwhile and more free

lives.25

The distinction has a significant practical bearing on public policy.

While economic prosperity helps people to have wider options and to

lead more fulfilling lives, so do more education, better health care, finer

medical attention, and other factors that causally influence the effective

freedoms that people actually enjoy. These “social developments” must

directly count as “developmental,” since they help us to lead longer,

freer and more fruitful lives, in addition to the role they have in

promoting productivity or economic growth or individual incomes.26

The use of the concept of “human capital,” which concentrates only on

one part of the picture (an important part, related to broadening the

account of “productive resources”), is certainly an enriching move. But it

does need supplementation. This is because human beings are not

merely means of production, but also the end of the exercise.

Taken from  page no   312-316   of  DEVELOPMENT AS FREEDOM By Prof Amartya Sen