Tuesday, July 26, 2011

Varieties of Capital People Have

There is a wide variety capital, including capital particular to human beings. We often hear about "human capital," but the way human capital is measured, it really means "education level." A person with a Ph.D. has more "human capital" than a college dropout. However, we can see the absurdity in this when we consider the fact that Bill Gates is a college dropout.

Nevertheless, this is how "human capital" is measured. This is why Richard Florida, for example, has suggested we consider "creative capital." However, we also need to consider such things as cultural capital, social capital, occupational capital, and actual skills. All of this is, of course, in combination with physical capital, investment capital, land, and capital goods.

A particular person is bound to have human, creative, cultural, social, occupational, and skills capital at different levels. Someone without formal education, but who is creative and has marketable skills has more capital than an unimaginative Ph.D. who knows only about the history of the Basque region of France during the 1200's.

Because few people take into consideration all of these different levels of capital -- at least consciously -- companies are in danger of misallocating this capital (often by missing out on people with high and diverse capital levels). I have little doubt that there is massive misallocation these kinds of capital across the country -- but that does not mean you have to be one of the companies doing this.

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