The Rise of Human Capital

No economist was more responsible for the appreciation, understanding  and analysis of the fact that people invest in improving their productivity than was Gary Becker.



At the Milken Global Conference in 2002 I showed Dr. Becker the graph in Richard Lynn's and Tatu Vanhanen's then-new book "IQ and the Wealth of Nations" demonstrating the high correlation between average national IQ and per capita income. I thought he'd be interested in this new stage of human capital research, but Dr. Becker was not happy about it.

Correlation is not causation SS SS. Have you read and believed everything written in the book "The Bell Curve"? ("The book also argued for reducing immigration into the U.S. which was argued to lower the average national IQ. ") It is nonsense if you do. IQ can be manipulated, not just by age but by diet, environment.

Do you really think Steve hasn’t already heard everything you just said a hundered times? Maybe you thought the hundred-and-oneth time would finally get through his thick skull?

Actually IQ is completely invarient.

Wait, now I'm confused. I thought the best evidence points that 40-60% of IQ is do to inheritance?

..due to...

He's a troll

"Actually IQ is completely invarient."

Oops, my mistake. You were most probably referring to an individuals IQ over their lifetime. Is it actually invariant, or just minimally variant?

Quite frankly, it's not the kind of thing you can Google and get any where close to a straight answer.

Why not ask questions about more useful and less subjective/biased indicators than IQ?

Perhaps you could instead ask about correlations between high levels of education spending and per capita income ...

How do you think Americans would line up in an intelligence test designed by Africans?

I think Steve Sailer has done his homework on this one - Becker was caught flatfooted. However I still strongly disagree with Sailers antimmigrant stance overall. Regardless of IQ levels immigrants can still bring a lot of value to the US economy.

Well I am not Steve, but I'll have a punt.

IQ tests and SATs are about the best predictor we have of future performance. Both in the work place and in college. Whatever they are testing, they are very good at it. If there is any subjective bias in IQ tests no one has managed to find it. Or to put it another way, does anyone seriously think that if the Ivy League made IQ-like tests written in Ebonics based 100% on life in da Hood a condition of entry that Asian children wouldn't be aceing them and Black children would still be failing them?

The richer people are, the more they spend on education. However, the more we have spent on education, the worse the results have been. One reason for that is the sort of people who do well in education, that is White people, are a declining share of the population and people who do badly, Blacks and Hispanics are growing fast. Faster than rising numbers of Asians can compensate. But mainly Unions.

White and Asian Americans would do well in any IQ-type test designed by Africans. African-Americans would not. We all know this. The failure of anyone to find a test that unveils the hidden genius of African American youth proves it. If such a test existed, we would have heard about it. Instead people lie about how racist the tests are and they quibble about what they measure. That is, they concede the basic facts.

I don't get the hate on low IQ people. Are you aware of the % of low IQ people you actually need to run a successful business? Not the clients, the employees.

If you have a child of course you want your child to reach a high IQ. If you have a business you'll need to hire and command low IQ people. I'd like to know the IQ distribution of any Fortune 500 company's employees. Oh dear, Wal-Mart is at the top......

No hate to be found here, we just like to awknowledge that low-IQ people have elected to be a drain on society in an increasingly fast-paced economy. They decided not to bring anything to the table and so they should be treated accordingly.

"Elected" to be a drain on society? Um, doesn't "hereditary" means that the trait is not "elected"?
And by no stretch of logic can they be blamed for outsourcing or automating all the jobs such people used to do.
I suppose you could blame them for not killing themselves and thereby raising the average IQ of society.


When the youth of Africa are educated, let us start asking questions how whether the nature of their minds differs sufficiently to militate for different approaches to educating them, etc.

Try an aboriginal track reading based IQ test

We forgot that IQ tests are racist and sexist. Remind me what other groups do left-wing lunatics presume the following should hold true otherwise surely the test must be biased. E[IQ Score | X] = E[IQ Score | Not X]

The moment I see the words IQ I stop reading, because I know it's going to be some racist opinion based on bogus methodology, most notably the fact that the IQ is not half as objective or standard as it proponents like to think.

And then I start reading again, because I need to understand the mind of people that this stuff makes sense to, and whether it is some proclivity towards superiority complexes or just a simple ignorance of the subjectiveness of the test itself.

Nathan, you obviously are unfamiliar with the literature. I was wholly convinced of the conventional wisdom until I encountered the comments on this blog, which helpfully linked to some articles by razib and others, at which point I did some reading of the literature and was satisfied that the conventional wisdom is wrong. Your claims about IQ have been thoroughly discredited.

Being rebuffed by a very wise man. Yes, that must be a sign you were right. I think you ought to publicize this more.

I have no idea what that graph means.

Human capital of Gary Becker in units of percent of economics journal references?

Percentage of books which contain the phrase “human capital” over time.

to elaborate: It is a Google n-gram graph:

Wonder why the graph ends at 2000? Try showing it to 2014... Is this to hide that it essentially plateaus after 2000? Is this only a coincidence that the onset of PC oppression correlates with diminishing enthusiasm for concepts such as human capital?

For one, Google only has ngram data through 2008.

For one, Google only has ngram data through 2008.

But this begs the question WHY does Google only have data through 2008? As much as I love the Valley this is definietly, without a doubt, an example where San Fransico PC leftwing culture has seeped through into the drinking water and is attempting to exorcise any discussion of IQ and Human capital.

There is simply NO other answer.

@Just Another MR Commentor

WHY does Google only have data through 2008? The answer is simple: H1B! H1B!

The r of human capital obviously has exceeded the g of n-grams for quite some time. Unless we start taxing usage of the phrase, eventually every book will contain nothing more than the words "human capital" repeated over and over on every page.

ngram for "labor" offers an interesting contrast

To really get your speculative juices going take a look at the comparisons of Labor, Capital, Human Capital, Hard Work and Honest Work. Capital beats out labor by 40%. Hard Work, Honest Work, and Human Capital may be critical catalysts but in terms of what is being discussed in books, they are distant also-rans. Delete Capital and Labor from the chart to look at Hard Work, Honest Work, and Human Capital. Hard Work is celebrated at twice the rate of Human Capital. Honest Work is down nearly 60% from 1900 and is a tiny fraction (2%) of the attention being paid to Hard Work.

And just for fun, compare Hard Work with Honest Politician. We believe in Hard Work more than 520 times more than we do in Honest Politicians. Or at least we talk about Hard Work that much more often. Apparently our disbelief in Honest Politicians goes all the way back to the beginning of printed time (changed the start date to 1500).

What is this? A chart for ants?

What's on the y-axis? I don't get it.

Has human capital or physical capital increased more?

I suspect that human capital is getting the royal shaft, as evidenced by stagnating real wages in a context of human capital growth.

The wages are skyrocketing for those with real human capital. Human capital is being rewarded as never before, I have no idea where you get the notion that human capita is getting the shaft.

The unions are mostly gone.

The negotiating power of labour is therefore reduced.

Their share of gains relative to "equilbirium" outcomes (equal negotiating power of capital and labour) can therefore be expected to be lower.

50 years ago, a typical job out of high school was sufficient to pay the mortgage and bills. Since, human capital has skyrocketed but many can't even pay the rent, let alone have a family.

If they can't even pay the rent, where are they living?? Are they homeless? If you think the economy was better 50 years ago I am sorry but you are completely clueless.

What is "equal negotiating power"? Is that where either side can request and offer whatever they want and each side is free to accept or not accept the other side's offer? Or is that where one side is forced to negotiate only with the other side by the government?

I have "real human capital".

Now where's my money?

The cost of a college education is only a small part of the cost of producing an 18 year old with a high school diploma.

As Professor Becker would surely have reminded everyone here, human capital remains vital to the continued success of the US economy. We need to make use of human capital from around the world by opening up this country to more immigration. More immigration = great human capital accumulation = a more successful economy.

You really ought to make the effort & try and go meet Prof. Becker.

If capital flows are good for growth and employment, then why not labour flows? Do we not achieve superior outcomes when production factors can flow more freely to their optimal use?

Another instance where attempted satire is true.

Congratulations for the super clear figure....

Here is an NGram of some of the great economists since 1940:
Keynes, Samuelson, Friedman, Coase, and Becker:

Becker does pretty well by this ranking

Becker starts in 1940?

I bet that almost as many "Becker" mentions are about Boris Becker as Gary Becker -- and that even more of them are about neither one of them, but one of the hundreds of other famous people named Becker.

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