Editorial: A Note on This Issue

T he human capital revolution began during the 1950s, perhaps mainly as an effort to understand the roles of education and training in promoting the economic growth of countries. Since then, human capital analysis has been used to unify and explain why earnings rise with schooling and work experience, why highly skilled persons move from less developed countries like India to developed countries like the United States, why families have large effects on children's achievement, and a host of related questions. Education researchers and practitioners generally resisted the initial work on the economic effects of education. They believed that the focus on earnings and jobs was too narrow and detracted from other education benefits. Eventually, however, many (but far from all!) critics realized that any contribution of more education to higher earnings and better jobs only added to other benefits. And subsequent work demonstrated that the same techniques used to estimate the effects of education on earnings can help quantify certain nonmonetary benefits. It also became apparent that politicians are more likely to provide additional funds for education when they believe the economic effects are large. During the 1970s, interest in human capital slackened, partly because evidence had cropped up suggesting that in the U.S. education no longer had a large effect on earnings. There was even talk of ''over-educated Americans/' This slackening interest was also due to economists' turning attention away from economic growth and toward inflation and unemployment. But the 1980s are seeing a revival of academic and popular interest in human capital—witness the extraordinarily successful September 19, 1988 Business Week cover story, "Human Capital/' This special issue of the ER will accelerate the revival. Murphy and Welch show that the weaker relation of education to earnings in the 1970s was temporary and that the financial benefits of schooling are now stronger than ever. The sharp rise in earnings differentials between college and high school graduates has induced increased numbers to continue their education beyond high school. The unexpected boom in enrollments recently, despite fewer persons reaching college age, is directly attributable to prospects of larger monetary gains. The }orgenson-Fraumeni and the Mincer papers relate education to economic growth, albeit differently. Jorgenson-Fraumeni show that the stock of earning power implied by education levels in the United States exceeds, perhaps by several times, the total stock of physical capital. Mincer directly ties education to growth by showing that rapidly progressing industries attract more educated employees. Apparently, an educated workforce adapts well, and it may also produce economic progress by stimulating innovation. His findings extend earlier research indicating that, whereas education is of little value to farmers in a traditional agricultural system, it adds greatly to the productivity of modern farmers who must cope with new hybrids, fertilizers, and other advances. Hanushek reviews evidence on education production functions—the relation between measures of education output (such as achievement scores) and inputs of teachers, books, and so forth. Evidence indicates that variables like class size appear to have only a weak effect on output. These findings are troubling because an increase in class size reduces costs per student. If larger classes do not reduce education output per student, why not enlarge classes to reduce costs? Although human capital takes many forms, schools and education have received the most discussion. But in many countries, including Japan and the United States, on-the-job training and proprietary schools have become immensely important. Schooling should be viewed as a major part of a highly interdependent system for providing skills and knowledge to succeeding generations. The economists' approach to human capital is indispensable in analyzing this complex system.D