COLUMN SYLVESTER EIJFFINGER
Full Professor in Financial Economics
Human capital, of capital interest
All established companies nowadays have a
Their models certainly do function for the short,
tant. Modern economies depend upon modern
staff department, that is often called Human
but not for the long term. Concerning the rise
technology. What do you need to build these
Resource Management. They know the
in the ageing population they only pass on the
technologies? Human capital. And only with
importance of human capital as the critical
costs, not the benefits like the expected growth
good human capital you can effectively utilize
success factor of our information and services
of the productivity. In addition, future genera-
the technology. The technological processes
economy. The more remarkable it is that the
tions inherit a production potential in the form
change continuously. That means that there
Centraal Planbureau (CPB) did not consider
of capital, knowledge and intangibles. And they
is ongoing need for investment. Also, the best
the benefits of investments in human capital
capitalize on the better technological develop-
investment that our students can do is to invest
in its recent calculations for the next few years.
ment. The amount of 29 billion euros savings
in their own human capital.
Although the financial crisis showed us the
the CPB presented therefore is not realistic.
risks of focusing on the short term, the effects
Sylvester Eijffinger
of investments on the long term still are not
Should countries invest more in education to
in collaboration with Annemarie Hinten-Nooijen
included. Why is it so difficult to see the cru-
promote economic growth? To answer this
(Centre for Science and Values)
cial importance of human capital in times of
question you have to measure the effects of
savings?
education on growth. Harvard economist
Philippe Aghion clearly showed how strong
We mostly speak of capital when we mean
investments in education and research con-
material or financial things. You hope for a posi-
tribute to the growth of productivity. For highly
tive return of keeping the capital and the invest-
developed countries education investments –
ments you made in it. That usually means that
especially in higher education – foster techno-
the profit comes after the costs that are initially
logical innovation, thereby making capital and
made. Our ancestors of the VOC knew already
labor more productive and generation income
that ‘de cost gaet voor de baet uyt’. You wished
growth. With the tendency of outsourcing (and
that the CPB would see investments in knowl-
the division of labor becoming more and more
edge and skills, in education and research as
worldwide and virtual) Western countries have
capital: a controlled stock which has a certain
to create production processes of high quality.
value.
Otherwise you cannot face the competition, for
Unfortunately, the CPB forgets qualitative
a high productivity development is crucial for
aspects like the effects of the investments in
development in future.
education and infrastructure on the development of productivity. They seem to regard
In our modern economy and our technologi-
things like care, the rise in the ageing population
cally more advanced world, skills conferred by
and education and research as consumer goods.
college education have become more impor-
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