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E. 15 Last, but not least, the apparent similarity between the two concepts 20 The Economics of Education of capital conceals substantial differences in the degree of control of the resource. The owner of physical capital can be properly termed a capitalist, since he or she is in control of either employing it in a production process or converting it into a liquid asset, living on it as a rentier. In contrast, an educated person who owns his/her own human capital cannot employ it in a production process unless hired as a dependent worker, thus becoming a wage earner.

Consider a free distribution of computers to children’s families in a school. Does this represent equality in resource 40 3. 4. 5. 6. 7. 8. The Economics of Education distribution? The answer depends on the ability to use the computers to help the children do their homework. If some parents are illiterate, and are unable to operate a computer since they cannot read the instructions (that is, they have imperfections in their functionings), then resources are still unequally distributed (for they do not ensure equal capabilities in helping the children to learn), in spite of the formal equality in their distribution.

Devoting a fraction St of time to schooling produces new human capital. 20 We also assume that more human capital is produced when more resources Eit are used in schooling (say, more and/or better teachers, libraries and so on). Finally, it is also assumed that there are decreasing returns on time spent in education. e. it is possible to compensate low talent with greater effort or better educational resources). 4) + where γt represents the direct cost of school attendance and ρ indicates the subjective rate of intertemporal discount.

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