Human Capital - Competence and Capital

Competence and Capital

The introduction is explained and justified by the unique characteristics of competence (often used only knowledge). Unlike physical labor (and the other factors of production), competence is:

  • Expandable and self generating with use: as doctors get more experience, their competence base will increase, as will their endowment of human capital. The economics of scarcity is replaced by the economics of self-generation.
  • Transportable and shareable: competence, especially knowledge, can be moved and shared. This transfer does not prevent its use by the original holder. However, the transfer of knowledge may reduce its scarcity-value to its original possessor.

Example An athlete can gain human capital through education and training, and then gain capital through experience in an actual game. Over time, an athlete who has been playing for a long time will have gained so much experience (much like the doctor in the example above) that his human capital has increased a great deal. For example: a point guard gains human capital through training and learning the fundamentals of the game at an early age. He continues to train on the collegiate level until he is drafted. At that point, his human capital is accessed and if he has enough he will be able to play right away. Through playing he gains experience in the field and thus increases his capital. A veteran point guard may have less training than a young point guard but may have more human capital overall due to experience and shared knowledge with other players.

Competence, ability, skills or knowledge? Often the term "knowledge" is used. "Competence" is broader and includes thinking ability ("intelligence") and further abilities like motoric and artistic abilities. "Skill" stands for narrow, domain-specific ability. The broader terms "competence" and "ability" are interchangeable.

Knowledge equity (= knowledge capital – knowledge liability) plus emotional capital (= emotional capital – emotional liability) equals goodwill or immaterial/intangible value of the company.

Intangible value of the company (goodwill) plus (material) equity equals the total value of the company.

Read more about this topic:  Human Capital

Famous quotes containing the words competence and, capital and/or competence:

    Witness the American ideal: the Self-Made Man. But there is no such person. If we can stand on our own two feet, it is because others have raised us up. If, as adults, we can lay claim to competence and compassion, it only means that other human beings have been willing and enabled to commit their competence and compassion to us—through infancy, childhood, and adolescence, right up to this very moment.
    Urie Bronfenbrenner (20th century)

    There was a sound of revelry by night,
    And Belgium’s capital had gathered then
    Her beauty and her chivalry, and bright
    The lamps shone o’er fair women and brave men;
    A thousand hearts beat happily; and when
    Music arose with its voluptuous swell,
    Soft eyes looked love to eyes which spake again,
    And all went merry as a marriage-bell;
    But hush! hark! a deep sound strikes like a rising knell!
    George Gordon Noel Byron (1788–1824)

    Such is the confidence that we have through Christ toward God. Not that we are competent of ourselves to claim anything as coming from us; our competence is from God, who has made us competent to be ministers of a new covenant, not of letter but of spirit; for the letter kills, but the Spirit gives life.
    Bible: New Testament, 2 Corinthians 3:4-6.