Thomas Sowell on Human Capital

One of the most significant passages from Thomas Sowell’s Basic Economics:

“Even among those who are conventionally called workers or laborers, much of what they contribute to the economy is not labor but capital—“human capital,” as economists call it. It is not so much physical exertion as job skills that constitute the contribution of a machinist, or entertainer. Most American workers today do not contribute merely work but skills, which is why their incomes increase substantially over their lifetimes. If it were their physical exertions that matter, their capabilities would be greatest in their youth and so would their incomes. But, where it is human capital that is being rewarded, then it is this is far more consistent with their incomes rising with age. As their human capital grows, the profit they receive on that capital grows, even though it is called wages.

A failure to understand the importance … Read the rest of this article!

The Additional Eight Hours of Life Per Week

Mark Aguiar and Erik Hurst published a working paper in 2005 titled “Measuring Trends in Leisure: The Allocation of Time Over Five Decades” that found that the average man and woman in the United States has approximately eight additional hours of leisure time per week compared to what their 1965 counterparts enjoyed.

This is a historical blessing.

This is time that could be spent improving one’s financial capital (self-teaching new skills to earn higher market rates for labor or studying investment opportunities so surpluses can be better deployed), beauty capital (exercising or making one’s own meals), social capital (socializing with those who ought to be socialized with), intellectual capital (reading materials that better position you to see the world as it is and how it ought to be), among others.

But that is not, collectively, what we are doing with those additional eight hours. The typical American is … Read the rest of this article!

Martin Luther King’s Dream Applied To Stock Ownership

Back when I was an undergraduate at Washington & Lee University, I made the argument to one of my history professors that low-fee DRIP plans provided an example of where Marxist principles actually overlapped with capitalist principles (I know what you’re thinking right now, and the answer is yes, I was always this sexy). My logic was this: I pointed out to the stock ownership plans that Ford, General Motors, Bethlehem Steel, RJ Reynolds, and Philip Morris offered their working-class employees to demonstrate how these plans satisfied the Marxist appeal to allow the workers to become part-owners of the company if they so desired while also appealing to the traditionally American capitalistic notion that if you work hard, spend less than you earn, and do something intelligent with that spread, you have the freedom to put together a nice life for yourself.

As I’m guessing most readers are aware, this … Read the rest of this article!