Reconceptualizing human capital

This essay situates human capital within a larger category of human capabilities that includes physical skills, cognitive functions, self-regulation, and caring capabilities. Our analysis of these capabilities departs from standard neoclassical reasoning about human capital in several ways. We note the importance of altruistic preferences (as well as skills) that are necessary for the effective care of others. We point beyond explicit forms of investment to the value of exposure to positive externalities in families and neighborhoods. We emphasize that caring capabilities generate larger social than private returns and are therefore not likely to be fairly rewarded in the market. This reconceptualization suggests that the costs of developing human capabilities are inequitably distributed.