Tuesday, July 28, 2009

Human capital: what is on the inside counts

Here's an excerpt from a conversation my wife and I had the other day:

Tony: Did you marry me for my money?
Shanna: What money? **laughs**
Tony: Good point.... Well then, did you marry me for my human capital?

I asked this question hoping that her answer was yes, but my hope rests on my unconventional view of human capital. Let me explain.

First a review: human capital is the stock of knowledge and skills embodied in a person. Human capital makes workers more productive, but that's not all. Because people with more human capital are more productive, they tend to earn more income.

This fact tends to dominate how people think about human capital. Namely, people earn degrees and learn on the job to build up their own stock of human capital. Most people go to school not for the associated good feelings, but to increase lifetime earnings. The investment in human capital, therefore, is often conflated with an investment in future earnings.

So, you can see what my wife must have been thinking when I asked her if she married me for my human capital. She probably thought I was asking if she married me for income I would eventually acquire. In other words, did she marry me for my future money? Accordingly, she said no.

That wasn't my point in asking the question.

Sure, having a good stock of human capital means that you can earn more money down the road, but there's a deeper story. Nobel Laureate Gary Becker loves to point out that human capital also makes you more productive in other activities. In other words, human capital is not just for inflating your wages, but it makes you better at life too.

Moreover, human capital comes in many forms. Human capital can be a well-timed sense of humor; the ability to solve problems; experience working with and raising children; or the ability to write well. Some of these skills are specific; some are general, but all types of human capital require a significant investment and they make us better at using our time. Now, what wife wouldn't want that in a husband?

For that matter, a big reason I married my wife is that she's human-capital-licious. She's smart; she's a great shopper; she has a well-developed sense of humor; she makes a great to do list; she's a wonderful cook; she often challenges me with thought-provoking questions; she'll make a great mother one day. And, much more. Moreover, I view all of these attributes of her personality as bits of human capital.

So, should you marry someone for his/her human capital? I encourage it. That's because human capital comes with the package. As my wife's investment in human capital is forever a part of her, I can only capitalize on that human capital by sticking with her for the long haul. I certainly plan to do so! Because I married her for her human capital, our relationship has better staying power.

More importantly, being with someone for his/her human capital reflects an old adage: what's on the inside counts. The takehome point is stronger: love people for their human capital. Such a relationship truly is an investment, and that's a formula for a long-lasting relationship.

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