Human Capability Approach, not Human Capital Theory

The human capital school of thought arose at the University of Chicago, with human resources being treated explicitly as a form of capital, or wealth (Schultz, 1961; Becker, 1964). Human capital has been defined as “skill, knowledge, and similar attributes that affect particular human capabilities to do productive work” (Schultz, 1971, p. 35). The linkage between human capital and production is widely accepted "as the main method to evaluate the effectiveness of investment in human capital" (Liu, 2022, p. 3). It is used by the World Bank, and by Governments as "a straightforward way to measure returns to investment in education using economic indicators" (p. 4).

On the other hand, the concept of human capability arose from the work of Amartya Sen, an economic construct (Sen, 1999) now known as the human capability approach (or HCA), emphasising human capabilities and agency. This is "not the empty agency of ‘free choice’ in Neoclassical economics, where the optimal choice is already determined by the given economic structure and given individual preferences, but a real agency based on values that individuals hold" (Andreoni et al., 2021, p. 180; emphasis added). HCA "define[s] development primarily as a process of expanding people’s individual freedoms and capabilities" (p. 180), with the implication that economic growth is the logical end-point of human development. 

 Individually, HCA allows us "to lead lives we value and have reason to value, provides a much needed counterpoint to the largely organisationally instrumental and human capital assumptions that have dominated debates on work and skills" (Bryson, 2010, p. 3). Organisationally, developing staff capability should have an economic pay-off. We need to keep asking "who benefits" when implementing HR practices to prevent a disconnect between the rhetoric and reality. Focusing on 'human capability' allows us to consider how organisations might assist individual's ability to live lives that they value; and how barriers may be created.

Human capital theory seems to count people as things. Human capability seems to count humans as a work in progress. Further, there has been a global "shift in focus from economic indicators to 'human development' [possibly signalling] a transition from the production-oriented human capital model to a more humanistic view on the objectives of development" (Liu, 2022, p. 5). For example, the UN now has Sustainable Development Goals with 17 markers being measured across 144 nations.

I think I prefer that approach. 

Sam

References:

Andreoni, A., Chang, H. J., & Estevez, I. (2021). The missing dimensions of the human capabilities approach: Collective and productive. The European Journal of Development Research, 33, 179-205. https://doi.org/10.1057/s41287-020-00356-y

Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. University of Chicago Press.

Bryson, J. (Ed.). (2010). Beyond Skills: Institutions, organisations and human capability. Palgrave Macmillan.

Liu, Y. (2022). Human Capital or Human Capability: Basic Education from a Capability Perspective [Pol 423: Poverty Studies Capstone Research]. Washington and Lee University. https://dspace.wlu.edu/bitstream/handle/11021/35838/WLURG38_Liu_POV_2022.pdf?sequence=1

Schultz, T. W. (1971). Investment in Human Capital: The role of education and of research. The Free Press.

Sen, A. K. 1999. Commodities and Capabilities (2nd ed.). Oxford University Press.