Human capital is a term for those means of production that are found only within people. Just as physical capital such as factories and land are necessary to produce goods, so are less tangible attributes, such as knowledge, creativity, and management skills.

The term human capital is used in both economics and business; when used in the business world it takes on a more flexible role and has become a bit of a buzzword. I will not be dealing with such usage here. The more formal economic term is plenty inexact as it is.

Different models use human capital in various ways, and moreover, may use different terms to denote different shades of human capital. In general, human capital refers to the sum total of all capabilities exhibited by an individual; education, experience, creativity, endurance, strength, health, social skills, and etc. Acknowledging that these factors are important help economic models explain the value of education and experience as investments, and help to explain both why some economies are more successful than others, and also why some people are more successful than others.

Some economists view human capital as the primary (or at least, most useful) factor in an individual's success. A lawyer earns more than someone flipping burgers at a fast food restaurant because the lawyer has more human capital -- or, to put it another way, the lawyer's skills are more in demand. Likewise, a star basketball player has a large amount of human capital in his athletic ability. Obviously, this is not a moral judgement; a doctor might save more lives, but throwing a ball through a hoop has more marketability, and therefor the best basketball players make more than the best doctors.

Human capital is often used as justification for government programs that provide subsidies for education, health, and job skills training; programs that increase overall human capital have the potential to improve the local economy, give people more freedom of choice in choosing their life-path, and increase future tax revenues. Education, training, and health are generally the most frequently focused on investments in human capital. In many cases, these investments are understood by the individual, and most people have at least a basic understanding of the value of a college education, a driver's licence, and avoiding crippling accidents. However, many governments and non-governmental organizations focus on education and health initiatives as an investment in a country's or community's long-term economic success. This is part of the justification for governments providing low-interest student loans, universal health care, and compulsory education for children.

Additionally, social capital, the sum of social bonds and relationships, has come to be recognized (along with many synonyms such as goodwill or brand value or social cohesion or social resilience), as distinct from the talent that an individual has developed within themselves.

This all makes human capital look like a good thing, but it is interesting to note that effective human capital can be in conflict with commonly held values; for example, an attachment to your family or hometown might be expected to increase structural unemployment, so a person who is willing to move to wherever she can earn the most money would have more human capital, in economic terms, than someone who is not. Generally the role of values and moral judgement are not focused on as an aspect of human capital, at least in economic models, for good and obvious reasons.

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