How and why the concept of "human capital" was developed

[timelets]

In earlier analyses the supply of labour was in effect envisaged as a stream of infinitely divisible homogenous units – rather than as coming, as Granovetter has aptly put it (1981, p. 17), „in inconvenient lumps called workers‟.

While from this position it could be shown that (under certain assumptions) the market wage would equal the marginal product of labour, little could be said theoretically about wage differences among workers – other than that some were apparently able to supply more units of the „common stuff‟ of labour than were others (cf. Phelps Brown, 1977: ch. 1).

Introducing the idea of human capital thus marked a major advance in providing a way of recognising both the existence of workers and the heterogeneity of their labour.

Under the theory, individuals do not simply take their labour power as given but, as rational actors, seek to „invest in themselves‟ so as to increase their productive capacities, and thus their potential earnings, up to the limits set by their natural endowments.

And they do this following a similar calculus to that used in investment in physical capital. For example, in the case of investment in education as a means of enhancing human capital, individuals will make that investment, in terms of the direct costs incurred and of earnings forgone while in education, that will maximise their – appropriately discounted – expected lifetime earnings.
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a major difficulty for employers, and especially when dealing with new entrants to the labour market, is that they have to engage in employment contracts on the basis of only very limited information about individuals‟ productive capacities. The suggestion then is that what leads employers to rely on educational qualifications in their selection procedures is not, or at least not only, the belief that such qualifications certify that their holders have acquired relevant knowledge and skills.
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What is at issue is not whether, but how, education relates to productivity. Are an individual‟s educational qualifications to be understood as warrants of an actually increased productive capacity or as signals of productive potential that employers could realise?

http://rss.sagepub.com/content/26/3/265.short
doi: 10.1177/1043463113519068

- need to apply this idea to amazon product reviews.
- a worker has become a cartesian product of "labour" and "human capital"