The Intellectual Discovery of Human Capital
Bill Butz, IIASA, WIC
Date: Mon, 20 June 2011 , Time: 15:30-16:30
Among the puzzles that entertained economists in the post-World War II years were these three:
- The economies of Japan and especially West Germany recovered so rapidly on the shaky foundation of overwhelming war damage that economists were left scratching their heads. The rapid economic development of the new state of Israel in what seemed a wasteland was just as mysterious. Neither mathematical growth models nor formal models of economic development were helpful.
- Prof. Wassily Leontief published in 1953 an empirical analysis of world trade patterns, showing that the United States was a net exporter of goods whose production was intensive in the use of labor, rather than capital. Yet, the U.S. was the most capital-intensive country in the world. The theory of comparative advantage, which explained one of the most steady empirical regularities in economics, predicted the opposite.
- Professor Robert Solow published in 1957 an analysis of the U.S. economy in the 20th century, indicating that only about half of its growth could be explained by growth in the “factors of production,” land, labor and capital. Subsequent research on other countries produced the same result. Again, a failure of theory and methodology to explain what was happening in the world.
No one considered together these three apparently unrelated mysteries until Professor T.W. Shultz delivered a paper in December 1960 entitled “Investment in Human Capital.” Schultz proposed one simple hypothesis, an insight so powerful that it instantaneously opened much of human activity to one of economic science's most well developed tool kits, capital theory. Shultz was attacked on several grounds. Over time, however, and beyond economics, this conceptualization is still transforming how researchers (including demographers) and policymakers think about education, health, nutrition, and migration.
About the presenter
Bill is a Senior Research Scholar with the World Population (POP) Program at IIASA and Director of Coordination and Outreach at the Wittgenstein Centre for Population and Global Human Capital.
Previously since October 2003, he was president and chief executive officer of the Population Reference Bureau (PRB), based in Washington, D.C. Before joining PRB, he was senior economist at the RAND Corporation; associate director of the U.S. Census Bureau, and division director for social and behavioral sciences at the National Science Foundation. His undergraduate and graduate educations were at Indiana University and the University of Chicago, respectively, where he studied economics, statistics, and demography.Mr. Butz has taught economic development at UCLA and the University of California at Santa Barbara, served on numerous commissions and boards, and written more than 80 research and policy papers on a variety of topics related to economic demography, nutrition and health, and statistical and science policy. Since 2001, he has served on the Board of Reviewing Editors of Science magazine, where his responsibilities include the social sciences, the Policy Forum, and the Education Forum.