Article Critique: Human Capital and Rates of Return: Brilliant Ideas or Ideological Dead Ends?

November 11, 2016

One of my professional memberships is to the Comparative and International Education Society (CIES), which publishes the Comparative Education Review journal. My interest in CIES stems from my research on higher education in Thailand and Southeast Asia. While international and comparative education is not directly related to my interests in human and organizational learning, I found this article to be more than relevant.

Klees, S. J. (2016). Human capital and rates of return: Brilliant ideas or ideological dead ends? Comparative Education Review60(4), 644-672.

Human capital theory and rate of return methodology have long been a dominant framework in comparative and international education and other fields. While there have been criticisms since its inception, it has been ubiquitous and widely accepted as an important mechanism for educational planning, evaluation, and policy making. In this article, I raise fundamental questions about the internal logic of this framework. In particular, I examine the problems with its two strands of empirical work, dealing with the impact of education on income and economic growth, as well as with its conceptual base. In conclusion, I briefly examine some alternatives to using a human capital framework for educational planning, evaluation, and policy making.

Klees, who was trained at Stanford and is currently at the University of Maryland, brings a voice that is nothing short of subversive to the widely accepted neoliberal paradigm on the value of education. He does a fine job setting up the arguments for the human capital approach that began with the likes of Becker and Schultz. He recognizes that the human capital approach played an important role in expanding access to education around the globe. However, Klees speaks to some of the chinks in the chain of the human capital approach summed up here as, “the meaninglessness of economists’ concept of efficiency, the fact that earnings do not reflect productivity, the fact that earnings are at best a partial measure of the benefits of education, and our inability to even get accurate estimates of the effects of education on earnings – taken together imply that the main empirical application of HCT [human capital theory], that is calculating the RORs [rates of return] to education, is fatally flawed” (p. 653-654).

This article functions as an indictment of the highly quantitative driven mentality that glosses over its own deficiencies that are now too glaring to ignore. For example, at one point Klees discusses the widespread use of regression to predict the value of education and how it fails to meet the assumptions necessary for regression analysis to be useful, i.e. that “all variables are included, measured correctly, and their functional interrelationships accurately specified” (Klees, 2016, p. 652). This can’t possibly be done well when considering the value of education in society.

Klees (2016) goes on to discuss the failure of connecting education directly to GNP and the conceptual failure of the human capital approach to capture the value of education outside of work.

He then discusses three alternatives: a human rights approach, which, let’s be honest, is not a friend to our economist friends; a human agency approach, which refers to the ability of people and groups to work towards change through social movements; and, the human capabilities approach. The last of these has been most appealing to me personally since reading Amartya Sen and Martha Nussbaum. To quote Nussbaum (2013), “The Capabilities Approach can be provisionally defined as an approach to comparative quality-of-life assessment and to theorizing about basic social justice…[it] is concerned with entrenched social injustice and inequality, equality, especially capability failures that are the result of discrimination nation or marginalization. It ascribes an urgent task to government and public policy-namely, to improve the quality of life for all people, as defined by their capabilities.” I think this approach is a strong contender for a replacement to HCT.

This article brings up a lot of philosophical arguments that I am sure my neoliberal friends will immediately want to repudiate. We would be wise to remember that Thomas Kuhn in his classic book on the structure of scientific revolutions points out that all paradigm shifts in science begin with subversive ideas to the norm. This, I believe, falls into that category, and it is my hope that we are on the path towards a paradigm shift in our understanding of the value of education in society.


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