Economist Gary Becker, who was awarded the Nobel Prize for his work in the held of human capital, reckons that the stock of education, training, skills, and even the health of people constitutes about 75 percent of the wealth of a modern economy. Not diamonds, buildings, oil, or fancy purses-but things that we carry around in our heads. “We should really call our economy a ‘human capitalist economy,’ for that is what it mainly is,” Mr. Becker said in a recent speech. “While all forms of capital-physical capital, such as machinery and plants, financial capital, and human capital-are impor~ tant, human capital is the most important. Indeed, in a modern economy, human capital is by far the most important form of capital in creating wealth and growth.”
There is a striking correlation between a country’s level of human capital and its economic well-being. At the same time, there is a striking lack of correlation between natural resources and standard of living. Countries like Japan and Switzerland are among the richest in the world despite having relatively poor endowments of natural resources. Countries like Nigeria are just the opposite; enormous oil wealth has done relatively little for the nation’s standard of living. In some cases, the mineral wealth of Africa has financed bloody civil wars that would have otherwise died out. In the Middle East, Saudi Arabia has most of the oil while Israel, with no natural resources to speak of, has the highest per capita income.
Naked Economics - Charles Wheelan