One of Robert Lucas’ most notable insights is that human capital (unlike, say, oil) moves from where it is scarce to where it is plentiful. (I thought Lucas had a very quotable line to this effect, but it doesn’t seem to google.) But why would human capital behave in this counter-intuitive way?
Here’s an interesting answer from Gogol’s Dead Souls. In this passage, a nephew tells his uncle that he wants to move back to his rural estate from the big city, and his uncle tries to dissuade him:
“That is not the point, uncle,” said the nephew. “…I have another duty—three hundred souls of peasants, an estate in disorder, and a fool as a steward. The empire will suffer very little loss if another man is set to copying documents in the office in my stead, but there will be a vast loss if three hundred men do not pay their taxes. What do you think about it? I am a landowner; if I busy myself with improving and caring for those who are intrusted to me, and if I present the empire with three hundred upright, sober, and industrious subjects, will my service be in any way inferior to that of any head of department—Lyenitzuin, for instance?”
The actual councillor of state stood with his mouth wide open in amazement. He had not expected such a reply. After reflecting for a short time, he began again in this fashion: “But still, my friend, how can you bury yourself in the country? What sort of society can there be among the moujiks? Here, at all events, you may encounter a general or a prince in the street. You will pass someone there; well, and there’s the gaslights, and busy Europe hard by, whereas, in the country, everyone you meet is either a peasant or a woman. And why condemn yourself to barbarity for your whole life?”
In short, Gogol’s answer to Lucas is similar to my response to Tim Harford: Human capital clusters because people who have lots of human capital think that people who don’t have lots of human capital are boring.
READER COMMENTS
ionides
Jun 10 2008 at 2:33pm
Easterly discusses this in “The Elusive Quest for Growth”, page 156. Lucas is puzzled because he is applying a decreasing marginal product (each smart person adds, and hence earns, progressively less). But human capital complements other human capital and produces increasing returns. Easterly calls this “matching”. “Cities are where high-skilled people match up”.
Mr. Econotarian
Jun 10 2008 at 3:16pm
I dined at the table next to Karrine “Superhead” Steffans on Saturday at the Ivy on Robertson.
Of course, I only figured out who she was after going to TMZ.com, which has video of her as she left the restaurant.
My friends think L.A. is where the “real barbarians” are, but I think it’s fun!
rpl
Jun 10 2008 at 3:21pm
Saying “people without human capital are boring” just pushes the question up a level without answering it. One could just as reasonably ask, “Why, then, do people with lots of human capital find people without it boring?”
For the original question I think the answer has to be that human capital clusters because human capital experiences stronger network effects than other sorts of capital (which is kind of what ionides says above).
For the revised question, I think the answer is still network effects, at least in part. For an intelligent person, having other intelligent people to interact with stimulates new ideas. People find this pleasurable and sometimes profitable; thus, they crave it.
Someone from the otherside
Jun 11 2008 at 4:06am
Mostly I too would say it’s networking effects. A lot of human capital is worthless if you’re on an island but gains a lot of value when you can interact with others with *complementary* human capital.
Besides, usually human capital is acquired in urban environments (not really many toprate schools out in the sticks…) and many people don’t go back to rural lands after having seen the amenities of somewhat more densely populated places.
JSBolton
Jun 11 2008 at 4:30am
It would more likely be that it is harder to move a mass of unintelligent contributors of labor. The more intelligent are found trying to get away from concentrations of menials, and the more so, the greater the lasting gap is between them. Speakers invoke altruism to get students to go to Africa, but never comparative advantage. In proportion as learning is articulated and sequential, it is wasted on those remaining at a basic level. Don’t send good teachers to the children of bad students. Don’t send the best…
Anon
Jun 15 2008 at 12:07am
Lucas says, apparently in the Mechanics paper (1988) “What can people be paying Manhattan or downtown Chicago rents for, if not for being near other people?” Is that what you’re thinking of?
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