The Actual Problem With Saying “Human Capital Stock”

A White House adviser wasn’t invoking slavery—but the phrase has other issues.

Kevin Hassett standing outside
Kevin Hassett at the White House on Friday. Alex Wong/Getty Images

The phrase “human capital stock” is a dry bit of academic jargon that economists have leaned on for decades, usually without generating a lot of controversy. It’s trusty shorthand, used to describe the overall level of education and skills across a country’s workforce. But thanks to an awkward TV flub by White House economic adviser Kevin Hassett, the term unexpectedly became the subject of an online uproar this week, during which Rep. Alexandria Ocasio-Cortez claimed that it was “racialized” and had its “roots in slavery.”

It doesn’t, really. There are lots of legitimate reasons to complain about the concept of human capital, or at least the way it is sometimes deployed by economists. But a deep and meaningful historical connection to chattel slavery is not one of them.

This whole linguistic fracas began on Monday, when Hassett appeared for an interview on CNN and tried to explain why he thought the economy was poised to bounce back quickly from the coronavirus crisis. “Our human capital stock is ready to get back to work,” he declared, sounding a bit like an A.I. that had yet to learn idiomatic English. “So there are lots of reasons to believe that we can get back to work way faster than we have in previous crises.”

Hassett was quickly and roundly mocked for accidentally describing Americans as a dehumanized mass of economic inputs, when he could have simply said that, you know, “people are ready to work.” The careless lapse into econo-speak made him sound a bit like a callous dork, urging people back to the job in the middle of a plague so they could tack a few basis points onto the country’s GDP in time for election season. Even his fellow economists, who understood exactly what Hassett was attempting to communicate, had words:

Things might have ended with some light Twitter ribbing. But then, in a pair of tweets Tuesday, Ocasio-Cortez suggested that “human capital stock” was not just a clunky, robotic, verbal fumble, but also kind of racist.

It’s not clear what roots Ocasio-Cortez is referring to (I asked her press secretary, but was told the office would not be able to comment before my deadline). But her claim is a stretch at best.

When economists talk about human capital, they’re typically referring to the professional skills people learn by going to school, getting trained on the job, or studying a trade. The idea is that talent is actually a form of wealth, just like a factory or shares in a company, and that education should be seen as a type of investment in human potential that pays a return over time, both for individuals and for entire countries. (As for adding the word stock to the phrase, again that’s just a way of saying the overall amount of human capital across the workforce. Economists like to talk about supplies of things as “stock,” even if it makes people sound like the flour that’s currently crowding your cupboard. It is what it is.)

This line of thinking dates back to the earliest days of economics. Adam Smith, for instance, famously suggested that the “fixed capital of society” includes “the talents and skill which certain members of the community have acquired by time and expense.” But the modern concept didn’t really take off until the 1950s and ’60s, when it was popularized by University of Chicago economists Theodore Schultz and Gary Becker, who argued that viewing the world in terms of human capital could help explain everything from differences in economic development to income inequality.

At the time, the Chicago Schoolers realized that the phrase human capital might make some people uncomfortable because of its unfortunate historical echoes. “The mere thought of investment in human beings is offensive to some among us,” Schultz wrote in 1961. “Our values and beliefs inhibit us from looking upon human beings as capital goods, except in slavery, and this we abhor. We are not unaffected by the long struggle to rid society of indentured service and bondage.” But Schultz argued treating skills as a form of wealth didn’t actually diminish human beings; rather, he suggested, it should be seen as liberating. “By investing in themselves, people can enlarge the range of choice available to them. It is one way free men can enhance their welfare.”

It’s true that if you reach back far enough into the early, premodern development of human capital theory, you can turn up some connections to slavery. There were thinkers who used the price of slaves as a reference point when calculating the financial value of human lives (see the 17th century economist Sir William Petty) or cited slaves as proof that human skills were, in fact, a kind of wealth (thank you to the distinguished Mr. William Nassau). Irving Fisher, who in 1897 became the first economist to use the phrase “human capital” in a major economics journal, turned out to have a fondness for eugenics (sadly not uncommon at the time). There may be some literary links as well: In his poem “The Age of Bronze,” Lord Byron describes a horde of Russian serfs as “a human capital / a live estate.”

But for the most part, the thread between human capital as we understand it today and legal servitude is attenuated at best. When writers wanted to actually talk about the financial aspects of slavery, they had a specific term for that: slave capital, use of which seems to have first peaked around the Civil War, and then again in the 1970s.

These days, meanwhile, the idea of education as an investment in human capital has become so deeply embedded in the way Americans talk about economics and the value of college that most of the icky associations Schultz worried about have melted away. Even AOC herself seemed comfy using the phrase a year ago.

(Update, May 28, 9:35 PM: After this article was published, a spokeswoman for the Congresswoman emailed me to emphasize that the Congresswoman’s previous statement referred to “human capital” not “human capital stock.”)

With all of that said, there are plenty of good reasons to take issue with the language of “human capital.” The biggie—at least in my view—is that, as the cantankerous City University of New York economist Branko Milanović has written, it “obfuscates the crucial difference between labor and capital by terminologically conflating the two.” Or, to put it another way, it totally obliterates the distinction between workers and the suits who own their company. In fact, that’s what it’s designed to do. As Schultz wrote back in the day: “Laborers have become capitalists not from a diffusion of the ownership of corporation stocks, as folklore would have it, but from the acquisition of knowledge and skill that have economic value.” It’s an idea that asks us to believe that a Facebook engineer’s ability to write Python scripts is more or less the same thing as the stock that Mark Zuckerberg owns in the corporation. I think most people would find that self-evidently absurd (you can’t make money off of your coding skills without actually going to work), especially at a time of yawning inequality when we’re literally waiting for the world’s first trillionaire. Human capital theory has sometimes been treated as an all-purpose excuse to minimize concerns about income inequality, since, hey, people are just reaping the rewards of their educations (though that happens less often now, since the value of a college degree doesn’t do a good job of explaining the existence of billionaires). And finally, thinking about skills as literal wealth can also lead people to some strange conclusions that simply don’t match lived experience in any meaningful way; I can’t tell you how many hours of my life I have personally wasted arguing with people about whether millennials are in fact richer than their net worths imply because they are highly educated (now try selling that degree on eBay).

For these reasons (and others), the past few years have seen a little rebellion against the idea of human capital from the left. Thomas Piketty pointedly refused to include human capital in his measurement of wealth in his book Capital in the Twenty-First Century, a decision for which he actually took some flak from certain fellow economists. Milanović has suggested giving the whole phrase the chop and just referring to skills as, well, skills.

That probably isn’t going to happen, since human capital is so thoroughly baked into the economics literature at this point that someone like Hassett will default to it, even when it makes them sound like a ghoul. But if we’re going to hate on this unlovely bit of econ terminology, we ought to at least do so for the right reasons.

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