Human capital

Robert Reich posted Wednesday about his concern that we are overly concerned with financial capital and ignoring human capital, particularly when we consider the major budget cutbacks that are being felt by state and local governments:

On average, state revenues account for half of public school budgets, and most of the funding of public colleges and universities. On top of this, home values are dropping, which means local property taxes are also taking a hit. Local property taxes account for 40 percent of local school budgets.

The result: Schools are being closed, teachers laid off, after-school programs cut, so-called “noncritical” subjects like history eliminated, and tuitions hiked at state colleges.

There is actually nothing here that isn't pretty standard boilerplate; everyone's saying the same things about investing in our human infrastructure and so forth. Reich does lay it out very clearly, and delineates the reasons for this odd prioritization, and what he writes is fairly unobjectionable:

It’s our human capital that’s in short supply. And without adequate public funding, the supply will shrink further. Don't get me wrong: I’m not saying funding is everything when it comes to education. Obviously, accountability is important. But without adequate funding we can’t attract talented people into teaching, or keep class sizes small enough to give kids a real chance to learn, or provide them with a well-rounded curriculum, and ensure that every qualified young person can go to college.

So why are we bailing out Wall Street and not our nation’s public schools and colleges? Partly because the crisis in financial capital is immediate while our human capital crisis is unfolding gradually. But maybe it's also because we don’t have a central banker for America’s human capital – someone who warns us as loudly as Ben Bernanke did a few months ago when he was talking about Wall Street's meltdown, of the dire consequences that will follow if we don’t come up with the dough.

There's truth here, of course, but I have my usual objections. We continue to fail to look for a balance of supply and demand in the labor market; we don't really know if we need to send "every qualified young person" to college, given the future job mix. If we really pursue the massive infrastructure programs that Dr. Reich favors, that's a lot of jobs that do not require the study of Medieval Philosophy, however much we wish to preserve the foolish ideal of the "educated man" as the primary goal of a school system.

I just am not certain our human capital is in "short supply," given the number of people who are un- or under-employed now. And it's really not "rooted here," not as long as companies can freely use labor from anywhere on the globe.

In general, though, I certainly can't really object to the main point here; our sense of priorities is really skewed when we talk about doing anything to keep a corporation alive while we jettison the people who built that corporation. Our insistence on propping up a legal fiction at the expense of actual families is curious, if understandable (given the perverse incentives and misconceptions that rule Washington). Despite my reservations about what we're doing with our educational system, I would surely rather see us work on that than to throw more billions at AIG.

But here's the thing, the reason I'm writing this post. Reich refers to "so-called 'non-critical' subjects like history," railing against their elimination.

You know what? History is non-critical. So is Professor Reich's subject, economics. So are lots of others that are accepted as core items in the curriculum.

Yes, I know that if we forget history, we're doomed to repeat it, or whatever it is. But studying history is the luxury of the well-off. How many full-time historians are there in the Sudan? How many full-time economists?

A poor economy has to prioritize, has to figure out what things are important and which aren't. Reading is important, writing is important, some math is important. You can make a case that certain topics are vital to the creation of an informed citizenry, but there's no universal agreement on what those topics are and how they should be taught.

Should America be at the point of having to make those decisions? Of course not, not yet. Personally, I think it's time to rank the functions of our educational system from 1 to n, then pare back (and it is necessary to start the pruning process) from n downwards.

Do high schools need to pay for competitive bowling teams? Does this really support the core mission of an educational institution? How about separate diving pools? What about "assistant curriculum specialists"? For too long, we've gotten away with saying that, if there's any good that can be derived from something, we'll pay any price for it (you see, I'm not unaware that there are students who gain from being members of the interscholastic bowling team; that doesn't mean there shouldn't be an appraisal of the costs and benefits). That's possible in a society which effortlessly produces surplus funds - I fear those days are gone.

Individuals are being forced to prioritize. Companies are being forced to do the same (except for the ones that are receiving vast quantities of our money). Governmental bodies at all levels are going to have to do it too. If that means we can't have junior high lacrosse, or we offer fewer history electives, then that's the way it goes. It may be regrettable, but it seems clear to me that we've expanded beyond our capabilities - we can't expect society to bear that forever.