“Some activities primarily affect future well-being; the main impact of others is in the present. Some affect money income and others psychic income, that is, consumption. Sailing primarily affects consumption, on-the-job training primarily affects money income, and a college education could affect both. These effects may operate either through physical resources or through human resources. This study is concerned with activities that influence future monetary and psychic income by increasing the resources in people. These activities are called investments in human capital.

 

The many forms of such investments include schooling, on-the-job training, medical care, migration, and searching for information about prices and incomes. They differ in their effects on earnings and consumption, in the amounts typically invested, in the size of returns, and in the extent to which the connection between investment and return is perceived. But all these investments improve skills, knowledge, or health, and thereby raise money or psychic incomes.

 

Recent years have witnessed intensive concern with and research on investment in human capital, much of it contributed or stimulated by T.W. Schultz. The main motivating factor has probably been a realization that the growth of physical capital, at least as conventionally measured, explains a relatively small part of the growth of income in most countries. The search for better explanations has led to improved measures of physical capital and to an interest in less tangible entities, such as technological change and human capital ...

 

The result has been the accumulation of a tremendous amount of circumstantial evidence testifying to the economic importance of human capital, especially of education ...”

 

 

From the introduction to the book “Human Capital” 
by Nobel Laureate Gary Becker in 1964