Our third component in the cycle of prosperity is human capital. In this context, I define Human capital as the physical, mental, and spiritual wherewithal to conduct economic labor. Arrows B, E, G, and K are the inputs into human capital.
Arrow B
We noted earlier that people and their environment are the two basic components of any economic system. No people, no economy. No food, no people. Throughout human history, the everyday lives of most of humanity have been focused on securing enough food to sustain survival. Economist Robert Fogel estimates that farming first emerged about 11,000 years ago, freeing about ten percent of the population from agricultural labor. This was the start of the first agricultural revolution.
About 5000 BCE, farming replaced hunting and gathering as the primary means of food production worldwide. About 4300 BCE, we find evidence of the first irrigation efforts, and shortly after that, the first cities began to emerge. Metallurgy and the advent of writing came a few centuries after that. Mathematics emerged around 2,000 BCE. Then came the invention of the iron plowshare around 1000 BCE. Agriculture became even more productive with fewer people needed for agricultural production. I’ve already alluded to the discovery of improved crop rotation methods late in the first millennia and the invention of the teardrop-shaped horse collar around 1000 CE. With each improvement in farming techniques, we also tend to see modest population increases.
The second agricultural revolution dates back to the 16th and seventh centuries. The rediscovery of classical knowledge after the fall of Constantinople, the rise of scientific study, the discovery of new crops and techniques from the New World, and the improved exchange of all this information due to the printing press led to agricultural improvement. The industrial revolution that emerged in the early 19th Century also had a major impact on improving agricultural production.
Achieving a steady, sustainable food supply in the West has had at least these impacts.
1. Few people are now needed to work in agricultural production, meaning most are free to pursue other life choices.
2. People are taller, bigger, and more powerful with more stamina. People are healthier and better able to resist illness and disease. They can develop and use their minds and be more productive.
3. People can live significantly longer. Not only can people become more specialized and productive, but they can be more specialized and productive over a longer stretch of years.
4. Sufficient food supply has lessened one of the pressures frequently leading to war and death.
Arrow E
Here is a quick review of some observations I highlighted in the post on technology.
Medical – Medical knowledge and techniques, which lengthens lives, eliminates diseases, repairs injuries, and generally leads to more people living satisfying, productive lives.
Shelter – Human dwellings and communities that protect people from natural threats, sanitary living conditions, and declining pollution levels per production amount. Electricity has made lighting and other amenities possible, freeing human activity from daylight restrictions.
Communication – Literacy and the whole panoply of communication tools make incomprehensibly large volumes of information available to billions of people, improving learning and leisure opportunities.
Transportation – Transportation technologies have shrunk the world, bringing more people into closer proximity. Delivery of goods to one’s doorstep, from the essential to the frivolous, is now an unremarkable reality, and transportation opens a broader range of employment and living options.
Labor Saving and Entertainment Enhancing Devices – Consumer products have decreased the time and labor required for various tasks, and they have enabled people to indulge personal interests and passions in historically unprecedented ways.
Arrow G
Economic growth and wealth enable people to purchase goods and services to improve their physical, mental, and spiritual lives, thus improving human capital. It frees children from the need to be laborers so they can devote their time to education and maturing. It allows people to work forty hours a week instead of the sixty-six-hour week of 150 years ago. It allows seniors to spend their twilight years in more leisurely pursuits. It also makes resources available for serving others through not-for-profit ventures.
Arrow K
Trade with other societies results in exchanges of knowledge and ideas that can be used to improve human health and general well-being.
There are two significant outputs from human capital.
Arrow C
People with better diets and more fully rounded lives are more productive and generate more goods and services, increasing wealth.
Arrow H
Improved human capital (physical, mental, spiritual) produces more people able to apply themselves to generating new technologies and effectively using existing ones.
Next, we turn to the component of Economic Growth and Wealth
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