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The Evolution of Human Capital

Paul Krugman: The role of higher education as a creator of human capital came along quite late.

Nancy Folbre, an economics professor at the University of Massachusetts at Amherst, suggested in recent commentary for The New York Times that the golden age of human capital — roughly speaking, the era in which the economy strongly demanded the kinds of skills we teach in liberal-arts colleges and universities — is already behind us.

She may well be right: after a long stretch when both technology and trade seemed to be undermining only manual labor, it does look as if many skilled occupations are now under threat by Big Data, Bangalore, or both.

I’d just like to add a sort of footnote, inspired by a conversation I had the other day with a Congressional aide. Has there ever before, he asked, been a time when technology undermined skilled labor, instead of making it more necessary than ever?

The answer is, of course, yes, once you realize that there are many kinds of skills, and that book learning hasn’t always been the kind that mattered.

As it happens, I’m in my Princeton office as I write this – and it’s worth thinking about why Princeton University was founded. It wasn’t as a prep school for investment bankers, even though that’s largely what the school became, for a while anyway. It was to train ministers. In the 18th century, there really weren’t that many positions where anything even vaguely resembling a modern college education was valuable, and surely many, if not most, of them involved preaching.

Yet there were skilled laborers, who were paid much more than their peers; it’s just that those skills tended to involve craftsmanship rather than pushing around words and other symbols.

And crucially, the truth is that quite a few of those skills did indeed end up being devalued by technology. Remember, the Luddites weren’t unskilled manual workers; they were skilled weavers and others who found themselves displaced by such technologies as the power loom.

After that, by the way, institutions like Princeton evolved into something more like finishing schools, where the elite acquired manners and connections. (Yes, there’s still more than a bit of that aspect today).

The role of higher education as a creator of human capital came along quite late. And maybe, as Ms. Folbre wrote, this role is already waning.

And you know what? I wrote about this way back in 1996, when The New York Times Magazine, on its 100th birthday, asked various people to write articles as if looking back from the year 2096.

Some of it looks dated, but not too bad, I’d say.

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