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Gary Becker's Human Capital Model

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Becker’s Model
Gary Becker is one of the economists who developed an economic approach to human behavior. One of his models is on investment in human capital. Human capital is embodied in individuals in the form of knowledge and skills. Expenditure on education is thus an investment in human capital since education increases the chance of future earnings, making life better. In his model, Becker showed how the investment in human capital is linked with the distribution of earnings. He defined human capital as “activities that influence future monetary and psychic income by increasing resources in people” (Becker 1994, pp.11). The underlying assumption is that of a rational individual who calculates the cost and benefit of his investment decision …show more content…

Thus there is a possible explanation which is connected to family background of an individual (the point raised by Becker but not answered). The importance of social cohesion, networks, trust and norms are ignored in human capital approach. The concept of social capital introduced individuals who are socially embedded into disciplines such as Economics. Social capital is that analytical tool which brings other social sciences in the realm of economics. Coleman (1988) defines social capital by its function which consists of some aspects of social structures and it facilitates certain kind of action of individuals within the structure. It is a relational category i.e. social capital comes about through changes in the relation among persons that facilitate action. Social capital (at individual level) also refers to a system of interpersonal networks (Dasgupta, 2002). So one can expect that the ‘elite group’ in which is abler than others in terms of investment in human capital is a result of greater formation of social capital. This group might have an access to resources both financial and symbolic which have made them separate from other groups. Therein lies the significance of schooling as a process which not only increases productivity (skill development) as human capital theory suggests but also instills a sense of ‘being’ in a group or in the formation of networks or social cohesion which helps in building human capital further. A simple hypothesis that follows from this discussion is that children who are embedded in richer and more consistent school-related relationships will obtain more schooling (Teachman et. al, 1997). Social capital sets the context within which human capital and other resources possessed by parents

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