Thomas Sowell, Human Capital More Important Than Physical Capital.

Thomas Sowell discusses the effect of foreign aid on human capital in the countries receiving it in this interview with William F. Buckley on his show Firing Line. It is from his book “The Economics And Politics Of Race”, written in 1983, (a book I highly recommend). If foreign aid affects human capital in the countries who receive it, how much does our bloated welfare system, and Government regulations affect the human capital of our own country today?

Quotes from the video about foreign aid, “..you are simply transferring the wealth that has already been created, but you are not transferring the ability to create that wealth……too often in foreign aid you are rewarding people for doing all the wrong things….you are subsidising irresponsibility.

Physical capital is the tools, machines, and infrastructure used to produce goods and services, which in turn increases the wealth of a country. Human capital is the knowledge and skills needed to maintain and increase this physical capital stock. As more people become unemployed, and as, for example older doctors start to retire because of the regulations from Obama care, knowledge and skill is lost, not just in these particular individuals, but in the knowledge and skill these individuals will not pass on to younger workers. This is another form of eating our seed corn, read previous post, Capital Consumption, aka, Eating Our Seed Corn.

Government “investment” is another form of consuming human capital as well as physical capital. Human capital is consumed because it is bid away form productive activity and channeled into all kinds of Government propped up failures. Read previous post, Government Intervention? Or Government Waste? As Robert Bradley Jr. has said,“When Government tries to pick losers and winners, it typically picks losers. Why? Because in a free market consumers pick winners to leave the losers for Government.”

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Explore posts in the same categories: Econ. 101, Government and Politics

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