The Fall of Human Capital, and the Rise of “Capital of the Mind”

University Design | David J. Staley

Phillip Brown, Hugh Lauder and Sin Yi Cheung, The Death of Human Capital? Its Failed Promise and How to Renew It in an Age of Disruption (Oxford University Press, 2020)

Richard A. Detweiler, The Evidence Liberal Arts Needs: Lives of Consequence, Inquiry and Accomplishment (MIT Press, 2021)

Wendy Fischman and Howard Gardner, The Real World of College: What Higher Education Is and What It Can Be (MIT Press, 2022)

Gary Becker and other economists of the Chicago School developed the theory of human capital in the 1960s. Becker defined human capital as “activities that influence future monetary and psychic income by increasing resources in people.” In addition to land, labor, physical capital, Becker included the knowledge embedded in human talent as a critical component of the factors of production.  The theory helped redefine and repurpose education as a mechanism for increasing human capital, and by the 1980s this idea becomes a kind of orthodoxy: that the purpose of a college education is to train for a high paying job.  The idea that education is a way to develop human capital became even more pronounced as student debt began to pile up: prospective students needed proof of a sufficiently high “return on investment” to justify the costs of higher education.  

Phillip Brown, Hugh Lauder and Sin Yi Cheung ask whether we are now witnessing “The Death of Human Capital?”  They are not arguing that advanced skills are no longer necessary to thrive in the modern economy.  Rather, they argue that “orthodox human capital theory has become a victim of its own success in getting individuals, families, and governments to believe that investments in education and training remain the route to better jobs, higher incomes, and economic growth.  The massive growth in college diplomas and degrees that national governments believed were needed to meet the rising demand for high skills has instead resulted in credential hyperinflation.” (2) 

The authors might be talking about the rate of “underemployment” observable in many national economies, defined as employees working at a job well below their skills and qualifications.  While a college degree still equates to better lifetime earnings over those without such credentials, the Cleveland Federal Reserve noted in 2020 that “about 41 percent of recent college graduates — and 33.8 percent of all college graduates — are underemployed in that they are working in jobs that don’t require a college degree.”  

Brown, Lauder and Cheung “are arguing that the orthodox theory of human capital, which has guided public and economic policy, is no longer fit for purpose in the twenty-first century.  [Their] argument is that a new theory of human capital is required to address today’s challenges presented by global competition, new technologies, and economic inequalities.” (2) 

Perhaps the time has come to sever the link between education and job preparation, or as the authors phrase it “The fight to free people from an education that treats them as a stock of human resources at the disposal of employers is key to the shift toward the new human capital we are proposing…In an age of machine learning, training humans to be smart machines is an education in technological servitude…Therefore permission to think needs to be extended to all rather than only the few.” (221) (emphasis mine)

“Permission to think” sounds very much like the kind of outcome we’d expect from a liberal arts education, an education deemed impractical in a world under the influence of human capital theory.  Richard A. Detweiler asserts that “a bone fide liberal arts education is impactful—fulfilling the common good and serving the future of both the individual and society—by educating people for lives of consequence, inquiry, and accomplishment. This impact is brought about through a learning environment that is socially and affectively engaging and involves the study of the full span of human knowledge, intellectual challenge, and the exploration of different perspectives on issues of significance to humanity.” (27) 

The evidence in Detweiler’s book title refers to his “analysis of liberal arts-related educational experiences and the adult behaviors of 1,000 graduates of a wide variety of types of colleges and universities, and statistically assessed the relationship between specific college experiences and adult behaviors.” (97) The study is notable because the assessment of the value of a liberal arts education is not viewed through the lens of recent graduates and their first job experiences.  What is most striking about the research is that “the more social or human interaction-based aspects of a liberal arts education are more consistently related to life impact than is the content of college study.” (171) While it would be simplistic to reduce Detweiler’s argument to “the major doesn’t matter,” what he is drawing attention to is that the educational setting and context, or what he calls the education ecosystem appears to have a decisive influence on positive college outcomes.  

Wendy Fischman and Howard Gardner define those positive college outcomes as “Higher Education Capital.” Perhaps this is the new theory of human capital sought by Brown, Lauder and Cheung?  

Like Detweiler, Fischman and Gardner also provide evidence liberal arts colleges need to demonstrate their value beyond the narrow guardrails established by the economics of human capital development.   Their “Real World of College” does not refer to vocational education—training for a specific job, perhaps the essence of the human capital approach to education.  “We also introduce a measure of the kind of analytic, synthesizing, and communication skills that we believe college should inculcate in students.  Terming it Higher Education Capital (HEDCAP, for short), we conceive it as the ability to attend, analyze, reflect, and communicate on issues of interest and importance.”  (xii-xiii)

HEDCAP is not human capital but what Fischman and Gardner term “capital of the mind:” “the capital that is best, and perhaps only, acquired through careful study across a variety of disciplines calling for a range of performances, and through formal and informal conversations across the day and into the evening with others who are involved in the same general enterprise. That’s what we hope college will achieve…” (115) 

Fischman and Gardner surveyed and interviewed stakeholders from a variety of colleges and universities, and conclude that “the college experience—along with the process of maturation—boosts the amount of Higher Education Capital across the board.  Based on these statistics, we can conclude that regardless of selectivity or status, higher education can make a positive impact in increasing or improving one’s Higher Education Capital over time.” (103)

One cannot help but be struck by the language employed by Detweiler, Gardner and Fischman as to the value of a liberal arts education and the development of HEDCAP: capital of the mind, permission to think, lives of purpose, lives of consequence and leadership.  Not just simply lives of employment.  

“We would like to believe,” conclude Gardner and Fischman, “that students—as well as their faculty, administrators, parents, trustees, and job recruiters—would concur that [Higher Education Capital] is important, and that it can and should be increased…colleges need to make this mission paramount.” (117) 

David J. Staley is a higher education philosopher, strategist, futurist and designer, and is an Honorary Faculty Fellow in Innovation at CHELIP.  He is the author of Alternative Universities: Speculative Design for Innovation in Higher Education and the forthcoming Knowledge Towns: Colleges and Universities as Talent Magnets.

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