Education as Human Capital

Throughout the western countries, education has recently been re-theorised under Human Capital Theory.

Human Capital Theory is the most influential economic theory of Western education. It is influencing the framework of government policies
towards education since the early 1960's.

In The Wealth of Nations (1776) Adam Smith formulated the basis of the science of human capital. Over the next two centuries two schools of
thought have been developed.

As per the first school of thought, Capital & Human Beings are classified as separate entity. A second school of thought claims that human
beings themselves are capital.

In modern Human Capital Theory all human behaviour is based on the economic self-interest of individuals operating within freely
competitive markets.

Modern Human Capital Theory gives importance to the significance of education and training as the key to participate in the new global
economy.

Across the world, the business situations have become more and more competitive.
Todays businesses are based on the application of technologies. Use of latest
technology can change the position of a company in any market. So, across the
world, companies are using the application of technologies to become more
competitive. In this regard, the companies are facing many problems. One of the
greatest problems in adopting the latest technologies is the acute shortage of
skilled manpower who can work in a technically integrated environment. The
greatest problem is to develop skilled manpower. Skill development comes through
proper training & proper training comes as a part of proper education.
So, naturally countries having a good supply of educated & skilled manpower will
have better opportunity to compete at the international level.
The only way to develop skill is to implement practical & skill oriented curriculum
system in secondary, higher secondary & tertiary educational institutes.

Capital investment is the only way to develop a modern education system that
produces skilled manpower.
The objectives of Capital Investment in Education are as follows:
To develop the physical infrastructure of HEIs (Higher Education Institutes).
To upgrade the quality of technical education.
To fund research on technological innovations.
To fund research on curriculum development.

To participate & compete in this globalized society, a country requires a large pool
of skilled manpower.