Human Capital Theory

Human capital is a term popularized by Gary Becker, an economist and Nobel Laureate from the University of Chicago, and Jacob Mincer that refers to the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. The subject is closely associated with the study of human resources management as found in the practice of business administration and macroeconomics. The original idea of human capital can be traced back at least to Adam Smith in the 18th century.

In the recent literature, the new concept of task-specific human capital was coined in 2004 by Robert Gibbon, an economist at MIT, and Michael Waldman, an economist at Cornell. The concept emphasizes that in many cases, human capital is accumulated specific to the nature of the task (or, skills required for the task), and the human capital cumulated for the task are valuable to many firms requiring the transferrable skills. This concept can be applied to job-assignment, wage dynamics, tournament, promotion dynamics inside firms, etc.

Arthur Lewis is said to have begun the field of development economics and consequently the idea of human capital when he wrote in 1954 "Economic Development with Unlimited Supplies of Labour." The term "human capital" was not used due to its negative undertones until it was first discussed by Arthur Cecil Pigou:

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