Human capital

Here the chapter draws a line that is easy to miss and important to keep.

Labour means the physical and mental effort used in production. Human capital means the specialised skills, knowledge, abilities and expertise needed to do that labour.

In one line: human capital is not just the basic effort of labour, but the quality and efficiency of that labour.

Two people can work the same hours. What they produce depends on what they know and can do. Anyone can knock a table together; a skilled carpenter's table is strong and well finished.

So what builds human capital? Three facilitators. The first is education and training, and the chapter separates the two carefully.

A civil engineering student learns the principles of design and materials at college: that is education. Training is different: watching construction sites, testing materials, learning safety procedures, hands-on practice. Knowing and doing are built separately.

The second is healthcare. Good health supports cognitive development (the growth of thinking and learning), so children attend school regularly and learn better; workers do more in less time, can be creative, and are not off work through illness.

The third is social and cultural influences. Japan's kaizen, meaning 'continuous improvement', applied since the mid-1940s, helped raise living standards. Germany's work ethic, valuing punctuality, attention to detail and quality, helped make it a world leader in technology and manufacturing.