Four types of human capital

Human capital can be divided into four categories:

(1) Biological capital
(2) Knowledge capital
(3) Track record capital
(4) Social capital

Biological capital includes your innate biological characteristics such as intelligence, sex, age, and health. Biological capital is the only one of the four types of capital which decreases with age. Not only does intelligence decrease with age (after it peaks in your twenties), but your entire body eventually wears out and dies.

Knowledge capital is everything you've learned. As I pointed out in my previous human capital post, most learning occurs on the job and not through formal education.

Track record capital is your track record of accomplishments, including your education (credential capital). It's correlated with your knowledge capital and biological capital, but it's far from a perfect correlation.

Social capital is your acquired social influence. It's who you know.

The former two types of capital, biological capital and knowledge capital, are positive-sum capital. This capital adds to the world's economy.

The latter two types of capital, track record capital and social capital, are zero-sum capital. This capital enables you to transfer wealth from other people to yourself, but it doesn't create value.

If someone earns a massively huge salary (a CEO for example), it's probably because he possesses a great amount of zero-sum capital.

I previously blogged about how worker pay is not based on what the worker is capable of contributing to the economy. This post explains what it's based on: track record capital and social capital.

Comments

[Douglas Knight]

I don't see how human capital can be zero sum. There are diminishing returns, perhaps eventually zero, so if you're competing (say, for a job) on track record and who you know, that can be a zero-sum competition. But that's the fault of the competition, not a universal statement about the capital itself.

Maybe these kinds of capital are just book-keeping, but such information is important. Knowing a group of people with a set of skills and knowing that they have those skills through their track records is a real value. You can do a job search, but avoiding that cost is the value of the capital.

[bbartlog]

I also don't see why the last two types of capital are zero-sum. The implication is that if no one had a social network, things would proceed as efficiently as before. I doubt that. Similarly (for track record) the implication is that if we erased knowledge of people's previous achievements, just as much would get done. If we had perfect measures of the first two kinds of capital, this might be true, but in the real world track record is a valuable albeit imperfect signal of the other two or perhaps three kinds of human capital you propose.

[michael vassar]

Another value posessed by track record capital is collateral. People with valuable reputations to loose thus have their incentives better alligned with those of their employers.

[Jason Malloy]

Not only does intelligence decrease with age (after it peaks in your twenties),

Longitudinal studies contradict this. If anything IQ may slightly increase up until about age 50 or 60.

Please read the Mackintosh book.

[Half Sigma]

Crystallized g continues to increase, but fluid g peaks in the twenties, as I recall from reading Raymond B. Cattell.

I previously blogged about this.

[Q]

Me too - it is not clear that the last two types of capital are zero-sum.
Specifically, they provide *proof* and *reliance*. These aspects also route more talented employees to projects where they are needed, and partially solve the information asymmetry problem.

If employees are 50% likely to finish a project on time, but you are personally 90% likely to succeed, and if I consider engaging in a project where success = +100 and failure = -150, I would not start the project (expect result = -75) unless I do have knowledge of your track record. Since the project would likely succeed, everyone (including society) is better off due to this 'proof' mechanism.