Three Essays on the Economics of Human Capital

Abstract

What role does human capital play in economic growth? More importantly, what role does human capital play in economic theory? Does the state have a role in ensuring human capital is used in its most optimal way? This dissertation will explore these questions and more. The macroeconomic approach to human capital assumes that as a country increases its human capital stock through more education, it will increase economic growth. This is largely due to spillover effects where an educated populace produces benefits to society that are not included in the individual’s cost-benefit calculation. These spillover effects often give justification for government intervention in things like education and the use of languages. This dissertation will critically analyze this approach and offer some alternative theoretical contributions from market-process theory and public choice theory to fill some of the gaps. The first chapter of this dissertation will review the literature on human capital and growth. It examines the history of how empirical studies on human capital and growth have evolved over time. It also examines the literature on education and specific outcomes (crime, democracy, health, etc.). This chapter shows that the empirical literature has largely failed to show any connection between education and economic growth. I ultimately conclude that the theoretical tools economists have used to answer address human capital and growth are incomplete and misleading. The second chapter of this dissertation, published in The Review of Austrian Economics, addresses the gaps pointed out in Chapter 1. The approach put forward in this chapter adds market-process elements of human capital where human capital investments are guided by institutions, market signals, and entrepreneurship and human capital is treated as a structure – one that is heterogeneous and multi-specific. Adding these elements to the economics of human capital gives economists a more useful theoretical lens for which to analyze the connection between human capital and growth. The third and final chapter of this dissertation addresses a specific form of human capital investment: languages. Specifically, it addresses a subfield within the economics of language called language policy and planning (LPP) which argues that language diversity in a given society is a public good which requires government intervention to achieve the optimal distribution of language use. Ultimately, I conclude that 1) LPP theory fails to acknowledge the epistemic limitations of language planners’ ability to plan an optimal language distribution and 2) even if one assumes language distribution has some public good elements, it is not a sufficient condition for state intervention.