Human Capital

​Many people don’t like the term ‘human capital’. They think it demeans human beings and makes them into something less than what they are, like physical capital or finance capital, turning people into chattels that are to be bought and sold in the market like so many widgets. 

​It’s the same thing with terms like ‘head count’. Workers don’t like being referred to by the employer as ‘the head count’. You know, like when they fire a bunch of people and say ‘we had to reduce the head count.’ Nobody likes to feel that they are being dehumanized.

But human capital does not refer to people. It refers to something valuable that people have, something that people are able to exchange with other people, and that is their labour, their skills, and their experience in doing things that other people value and are prepared to pay for. Workers offer labour, employers offer wages, and everybody is better off than they would have been had they not made the exchange. The worker does not supply labour out of a desire to be helpful; the employer does not pay wages out of the milk of human kindness. It is an exchange of value – a trade.

The good thing about human capital is that it is a resource everyone has, or can have. It’s not like credentials or money or connections or any of the other things that people think they will need to get on in life and which many people lack for no fault of their own. It is simply the willingness and ability to be productive and to provide something – labour, services, skills, advice…literally anything that someone else will find useful and therefore be willing to pay for.

The Smithian individuals treat their ability to work as human capital, that is, something they have at their disposal and can sell in the market – human capital is something they have, not something they are.

Lisa Herzog, Inventing the market
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​The thing about supplying a product that other people want to pay for is that other people’s needs and desires will change. This means that whatever it is you bring to the market, it will have to be dynamic and change over time. That’s obvious. If you’re selling something you can’t force people to continue buying your exact same stuff forever. Alas their tastes will change and they will want something different as time goes by. Buyers can be so fickle. The smart provider of human capital either locks in to something he knows people will always want and always be willing to pay for (of which there are very few things), or more likely makes sure to keep an eye out for the twists and turns on the path ahead.

Human capital is either transferable to other areas, or workers can easily acquire new skills and competences…Last but not least, however, the individuals must also be willing to change between different jobs when the market gives them incentives to do so. 

Inventing the market.
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​Being ready and willing to change is difficult. If you have a winning product, obviously you want to stick with it forever and not prepare for the wind to change at any moment. Change is so unsettling. Moreover we soon come to identify who we are with what we do, so that a change in what we do seems to imply a change in who we are. And nobody wants to change who they are all the time – we need a stable sense of identity. This is why it’s so important to realize that human capital is not who we are, but what we bring to other people in market exchanges. What we bring can change over time; it does not mean that who we essentially are is changing according to market vagaries.

This means that [workers] must not see their professional activity as ‘constitutive’ for their identity, at least not the activity in one particular branch or company. In this sense, they must not be embedded in the social structures of their professional lives or regarded as an essential part of themselves….

Workers must have their human capital at their disposal, without losing their identity when deciding to put it to a different use.

Inventing the market, p. 72.

This is even more important when faced with the threat of being replaced by a robot. Artificial intelligence will introduce new ways of doing things, and human beings who want to keep working and not be forcibly retired to live out their days on the beach being supported by robot taxes will simply have to evolve and adapt their own ways of working. There is no need to lose your identity as a working person, just because your job has been outsourced to a fecking robot. You can put your human capital to a different use, or to the same use in a different way. It may no longer be possible to outsmart the robots, but it will always be possible to find ways to make a good trade with other human beings.