I don’t pretend to be an economist. If I had been, I’m sure that I too would have been unable to see the big real-estate bubble back in 2008, even though crazed Californians were flipping houses all around my neighborhood.
Nevertheless, I am trying to think useful thoughts about the biological aspects of human capital. Wiki says that human capital is ” the stock of competencies, knowledge, habits, social and personality attributes, including creativity, cognitive abilities, embodied in the ability to perform labor so as to produce economic value. ” I’m down with that, although I’d choose to to take a separate look at creativity.
That stuff is all learned – babies don’t know much – but people vary in how easily they learn things. There are also cognitive ceilings, such that you can’t really understand a subject beyond a certain complexity. This can bite pretty hard when you run into it, as Luis Alvarez once said: ” The world of mathematics and theoretical physics is hierarchical. That was my first exposure to it. There’s a limit beyond which one cannot progress. The differences between the limiting abilities of those on successively higher steps of the pyramid are enormous. I have not seen described anywhere the shock a talented man experiences when he finds, late in his academic life, that there are others enormously more talented than he. I have personally seen more tears shed by grown men and women over this discovery than I would have believed possible. Most of those men and women shift to fields where they can compete on more equal terms. “
Or perhaps you could understand those things, but it would take more time than you have (say longer than a human lifetime) or more energy and dedication than you have. I would guess that there is also a practical limit on how many things you can know – because of time, if nothing else. That too must vary between individuals. John von Neumann absorbed info pretty easily – a professor of Byzantine history, at one of his Princeton parties, was dismayed to find that John knew more about the subject than he did.
You might compare the human capital situation to soil fertility. Some people are cheaper to educate than others (Ramanujan!), and the practical limit of education is not the same for everyone. An observational fact, not something that absolutely had to be the case, is that the payoff for educational investment plateaus: we have a lot more ways of spending on education than we did in 1940, but the grandkids of people who took the Iowa Basic Tests in 1940 score about the same as the oldsters did. Spending on education is like pushing a rope: past a fairly low point, nobody knows how to further improve things by spending more money. Although, to be fair, the universe of proposed improvement methods is a narrow one. I’ve never even heard an educationist suggest caffeinating the hell out of students – certainly worth trying.
At the upper end of the IQ distribution, people can learn things rapidly. High-school freshmen in in the Study of Mathematically Precocious Youth (SMPY), who had tested in the top one-hundredth of one percent, managed to get a median score of 727 out of 800 on an AP Biology exam (95th percentile) after an intensive three-week course. Of course, to be fair, they averaged 52nd percentile before they even took it, even though they had not previously studied biology.
That’s an extreme example, of course, but it shows how far up is in this business.
On the other end of the spectrum, there seem to be plenty of kids who just don’t get algebra II. By which I mean that they can’t get algebra II: many suggest getting rid of the NEA, or supplying them with sufficiently magical teachers, or some other currently fashionable education nostrum, just has to work.
It doesn’t have to work.
Even if you came up with a scheme that worked – which nobody has – it would have to be practical, affordable, and nontoxic, which rules out many possibilities.
Moreover, the fraction of kids that don’t get algebra II varies a lot between populations. Generally, such racial /ethnic ‘gaps’ seem to bother people a lot more than randomly-distributed incompetence, of which we also have plenty. Note: that SMPY sample was about half Ashkenazi Jewish, although for some reason they never seem to have published anything about that.
If economists absorbed the results of psychometrics and genetics, they would have a reasonable start on the biological influences on human capital. I say this realizing that other personality factors matter, not just intelligence – but A. we don’t have good measures and B. intelligence is genuinely important. If Brad Delong did this, he would not find low per-capita GDP in Kenya such a mystery, or economic success in South Korea. But he won’t, of course. There are more important things than figuring stuff out.
If economists took those results into account, they’d be mighty skeptical of the current enthusiasm for Pre-K.
In thinking of the long-run, they’d have to think about heritability and natural selection, which they sure don’t now. Considering those issues, it’s pretty obvious that what we now consider an efficient way of running an economy has disastrous long-term consequences for human capital formation.