Peter Radford — A Little Knowledge

Knowledge as a factor of production. Knowledge is broader than information. Knowledge includes tacit knowledge, skill, and critical and creative thinking. In other words, the study of knowledge involves epistemology, logic and language, psychology, and other relevant fields in addition to information. 

Information can be formalized but a great deal of knowledge cannot, at least given present limitations and future prospects through technology.

Labor as the human component of productions that complements capital (land included) had been conceived in terms of time, strength and ability to preform tasks. In this view, labor and capital are substitutable.

In the expanded view that includes knowledge in the broad sense, this is not the case. Accumulated knowledge is the bedrock on which the foundations of a society or civilization are erected. This is what differentiates the human species from other species of sentient beings with whom humans share the planet.

Accumulated knowledge is largely a commons, the shared inheritance, so to speak, of humankind. Innovation is based on adding to that accumulation. Intellectual property—patents, copyright, trade secrets and so forth — may isolate some of this innovation for a time, but eventually it all gets added to the storehouse of knowledge.

Without considering this factor and including it to the degree possible, economics remains an oversimplification that is not capable of dealing with the key factor.

The Radford Free Press
A Little Knowledge
Peter Radford

Brad DeLong — Friedrich Engels on invention as a factor of production

Engels quote.

Grasping Reality

Friedrich Engels on invention as a factor of production

Brad DeLong | Professor of Economics, UCAL Berkeley

George Monbiot — Mass starvation is humanity’s fate if we keep flogging the land to death

What happens when land is consolidated with capital as a factor and the objective is maximizing profit short-term.

The Guardian
Mass starvation is humanity’s fate if we keep flogging the land to death
George Monbiot

See also

Patreon
Principles of Political Economy: The opening lines

Steve Keen

David F. Ruccio — Why human capital is not capital

Neoclassical economists folded land into capital to obscure land rent. Now the push is on to fold labor into capital to obscure expropriation and exploitation as conditions in the creation and distribution of surplus value across the traditional factors or production — capital, land and labor.

Occasional Links & Commentary
Why human capital is not capital
David F. Ruccio | Professor of Economics, University of Notre Dame

Steve Keen — Incorporating energy into production functions

Economics ignores energy, which is arguably the primary factor. This is something I noticed long ago as a deficiency, probably because I am not an economist and was not trained to ignore the obvious. 

This is a post on the history of economics and where it went off the rails. Steve suggests what to do about this.

Steve Keen's Debtwatch

Incorporating energy into production functions
Steve Keen

Edward Lambert — Circular Flow of Labor & Capital

Conclusion: The rise in power of the monopolies as Joseph Stiglitz writes is giving more power to capital income. The above dynamics between labor and capital reflect what he is saying.

The implication is that capital income has been getting more and more control over labor. The result has been lower labor force participation, higher unemployment, lower capacity utilization and a weakening utilization of labor.

Something should be done to give power back to labor.

Effective Demand
Circular Flow of Labor & Capital

Edward Lambert

Merijn Knibbe — Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes.

Important. How and why economic rent is back on the table after being excluded by neoclassical economics in reaction to Henry George.

It's short. Read the whole thing. This is potentially a game-changer, as Michael Hudson has been saying. 

Once rent comes into the picture, it becomes clear how the game is rigged by power, since power is required to extract rent. 

If one wants to continue claiming with neoclassical economists that economics is based on laws of nature, then it is necessary to include laws of power in the equations.

Real-World Economics Review Blog
Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes.
Merijn Knibbe

Sandwichman — What In Hell Is Capital?

The question is, whence and how does capital arise to become separate from labor? The answer of Marx is that it arises from a monetary economy that enables M - C - M', that is, using existing money to make money by purchasing capital goods and the necessary inputs including labor offered for rent by those free to do so, that is those who are neither slaves nor land-bound serfs that toil for subsistence from their own produce for the landowners' benefit as rent. That is to say, capitalism has certain preconditions that make it possible.

The human capital debate that is now taking place on the blogs is based on Gary Becker's view that capital and labor are actually not separate. The other side is based on refuting this view. At bottom the issue is over economic rents.

Econospeak
What In Hell Is Capital?
Sandwichman

Robert Paul Wolff — Human Capital

Enter Gary Becker, who resurrected the concept of "human capital" to take account not of the worker's body or her food and clothing but rather to incorporate into Economic Theory the important fact that in a modern capitalist economy, some categories of workers regularly earn wages significantly higher than the standard pay for semi-skilled machine operatives, as a consequence of their educational credentials and the skills supposedly thereby represented. These workers, it is suggested, have invested in themselves by holding themselves off the labor market while they acquire further education, often at considerable expense, thereby accumulating "human capital." . They are thus like business owners who use a portion of their profits [or take loans] to purchase more sophisticated machinery, the cost of which, amortized over the life of the machines, is a good deal less than the market value of the additional product churned out by the improved capital goods. 

This modern version of the old notion of human capital allows economists to blame the low wages of unskilled workers on their own improvident failure to invest rather than consume, an interpretation of poverty that is quite comforting to those sitting atop piles of accumulated capital. 

But the analytical concept of human capital has other interesting uses in our attempts to understand modern capitalism, which exhibits a segmented and highly pyramidal wage structure. It can, for example, be deployed to make sense of the notion of relative exploitation. High wage workers can be understood as both exploited by their employers and exploiting lower wage workers, a construal that seems to comport with our intuitive sense that corporate executives, lawyers, professors, and such like high wage employees occupy a social position more akin to the owners of capital than to hourly wage earners at the bottom of the income pyramid.

The Philosopher's Stone

Human Capital

Robert Paul Wolff | American political philosopher[ and professor emeritus at the University of Massachusetts Amherst

Max Sawicky — Noah and Nick, Too

Follow up from Max Sawicky that makes some further good points what labor should be treated as labor and not capital.

It's a category mistake aka category error, and it's a logical fallacy.

A category mistake, or category error, is a semantic or ontological error in which things belonging to a particular category are presented as if they belong to a different category,[1] or, alternatively, a property is ascribed to a thing that could not possibly have that property. An example is the metaphor "time crawled", which if taken literally is not just false but a category mistake. To show that a category mistake has been committed one must typically show that once the phenomenon in question is properly understood, it becomes clear that the claim being made about it could not possibly be true. — Wikipedia 

Not only is "human capital" a category error, so is the economic view it is based on. And this is the fundamental problem with conventional economics. There is no problem in choosing any modeling method as along as it contributes to the task one is undertaking, to think about some issue heuristically but precisely, or even just for fun. But that is not the use to which conventional economic models are put. They are used for policy formulation, or at least recommend for such use. Moreover, they are based on a world view that their advocates advance. The model is taken to be not only a simplified model of economics relationship but also a key piece in an ideology that expresses as world view. 

This is a jump from economic modeling to philosophy that is based on huge unacknowledged assumptions about ontology, epistemology, ethics, and social and political philosophy, as well as ignoring in put from relevant disciplines such as psychology and cognitive science, anthropology, sociology and history, all of which deal more critically with what economists tend to assume uncritically. Worse, The economic approach is used to plead for a point of view being representative of reality that favors the interests of a privileged social, political and economic class.

MaxSpeak
Noah and Nick, Too

Max Sawicky

Max Sawicky — For Noah and Nick

Max Sawicky rejects the need for and appropriateness of "human capital."

The traditional factors have traditionally been decompose as needed into types of capital, and types and uses of land such as agricultural, resource extraction, commercial and residential, as well as types and grades of labor, with the distinction of salaried versus wage, management versus worker, white collar versus blue collar, skilled versus skilled. The supposed need to introduce a new distinction or to fold land into capital are an unnecessary and confusing aggregation that clouds modeling instead of clarifying it.

Do firms use the concept of human capital? For sure. It's a buzz word. Management attempts to produce metrics on the dollar value employees produce over time, which is the ROI with respect to the cost of employing them. But they are still employees even if the firm seeks to capitalize them for management purposes, e.g., retention and promotion and compensation. They are still part of labor and not capital goods. Labor is not fixed investment and it is not depreciated. In fact, unlike capital, labor tends to appreciate over time rather than depreciate, especially in modern environments that don't wear down workers, although some business models are still based on this, especially for foreign labor in developing countries where protections are slight to non-existent.

MaxSpeak
For Noah and Nick

Max Sawicky

Matthew Martin — Is human capital capital?

More thoughts on human capital.

Of course, human capital is not capital. If it were, we'd just call it capital and lump it in with the rest--the purpose of the term "human capital" is to distinguish it from actual capital.

So, if it's not capital, what is human capital? At most, I'd say it's a modeling insight. The vague notion of "skills" and knowledge that it stands in for are very real, but when it comes to modelling we are really just pretending it's a kind of capital stock. The key insight was in recognizing that skills and knowledge share a few of the same kinds of intertemporal dynamics as capital, and that we can obtain accurate predictions by modeling them as such, even though they differ in lots other ways.…

Separating Hyperplanes — A blog between the spheres of Economic Theory and Policy Analysis
Is human capital capital?

Matthew Martin | health economist and programmer for the Cancer and Blood Diseases Institute at Cincinnati Children’s Hospital Medical Center

Noah Smith — Is human capital really capital?

Depends on context and modeling choices.

For some applications, actually, you can actually represent anything as capital - just calculate its expected present discounted value, and voila, you're done.

This is the financial aspect of capital rather than capital as a factor of production. It's sort of like the difference between firm investment as a type of expenditure versus financial investment as a form of saving.

Using the same sign for different symbols is an ongoing problem in economics. See, for instance, the running controversy over saving and investment. This is the second capital controversy and the first one is not agreed upon yet in the profession.

Bonkers for a "science." If you can't even get your definitions specified, what hope is there for clarity and consistency? No wonder economics is in such a mess if anything can mean whatever one wants it to mean.

Noahpinion
Is human capital really capital?
Noah Smith | Assistant Professor of Finance, Stony Brook University

David F. Ruccio — Human capital controversy

As I have long explained to students, the theory of capital is the most controversial topic in the history of economic thought because the theory of capital is the theory of profits—and therefore an answer to the question, do the capitalists deserve the profits they get? 

The original capital controversy was never resolved. But no there’s a new capital controversy, a controversy over human capital. It was launched by Branko Milanovic, based on Thomas Piketty’s refusal to include human capital in the other forms of capital he measures in his inquiry about the history and future prospects of wealth inequality.** 

Basically, Milanovic argues that labor is not a form of capital because labor involves a “doing” (work has to be performed in order for wages to be paid) while other forms of capital are characterized not by work but by nonwork, that is, ownership…
I’m with Milanovic on this. There is a fundamental difference between doing and owning.  

But I also think the human capital controversy has even larger implications.…

Occasional Links & Commentary
Human capital controversy
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Branko Milanovic — On "human capital" one more time

My recent piece on why the term “human capital” is misleading and confusing has generated several responses. For example, for Nick Rowe, everything, labor and all, is actually--capital; then just a couple of days ago Tim Worstall takes me to task for “introducing Marxian class analysis or something” (I like this “something”). Some critiques are difficult to understand because they do not seem to address at all what I find objectionable in the use of “human capital” as a term. They seem more motivated by the ideological considerations, which, in my initial post, I deplored.

In order to be clear on what I had in mind, let me summarize my points once again so that there is no misunderstanding.…

Global Inequality
On "human capital" one more time
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

In my view, and that of many others, capital is an asset that is owned as property, which is alienable and which is government by property rights and law. Labor is not an asset that is owned by either the employer or workers. There is no self-ownership in custom or law and human and civil rights are not based on self-ownership. Moreover, in modern societies in which ownership of human beings is prohibited, individual freedom is an inalienable right that cannot be sold or transferred and it can only be forfeited with recourse to due process under constitutional protections and criminal law.

Therefore, conflating labor with capital is simply nonsensical.

Capital is an entirely different category than land under custom and law also. Moreover, capital is produced by labor, whereas land is a natural resource, which may be improved and even recovered by labor, but it is not produced by labor. The amount of capital is limited, while the amount of land is for most purposes limited, although it can be converted for use through labor.

Land, labor and capital are three separate and distinct factors of production, in that order. Land precedes labor, and labor generates capital goods used for production of commodities and more capital goods.

Turning everything that factors into production capital is either silly or based on ulterior motives, as Branco points out about Becker's ideological economics designed to commodify labor and make distribution irrelevant.

Branco Milanovic — The misleading terminology of "human capital"

…why is “human capital” such a disastrous turn of phrase? There are two reasons. First, it obfuscates the crucial difference between labor and capital by terminologically conflating the two. Labor now seems to be just a subspecies of capital. Second and more important, it leads to a perception — and sometimes to the argument used by insufficiently careful economists — that all individuals, whether owners of real capital or not, are basically capitalists. Even if you have human capital and I have financial capital, we are fundamentally the same. Entirely lost is the key distinction that for you to get an income from your human capital, you have to work. For me to get an income from my financial capital, I do not.

If we are all capitalists now, then no one is.

Right. And that is the intention. 

Similar situation with folding land in with capital. 

Why not conflate them? They are separate and different factors of production, and economic theory is about factors. Distribution is to these factors based on their contribution to production, and to the degree that distribution to a factor exceeds productive contribution, it constitutes economic rent. A key focus of neoliberal economics is to conceal rent-seeking and rent extraction, or to justify it as the result of "just deserts" based on specious assumptions.

Global Inequality

The misleading terminology of "human capital"
Branco Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

Izabella Kaminska — The tyranny of land

Izzie riffs off Karl Smith.

Why is this significant. Is it merely Malthusian? I would venture to speculate it's leading to discussion of a land tax based on economic rent from increased valuation not attributable to the land owner's contribution. Back to Classical economics. Michael Hudson will be pleased.

Dizzynomics

The tyranny of land

Izabella Kaminska

Matias Vernengo — What makes capitalism capitalism?

Are you sure you know? Take the test.

Naked Keynesianism

What makes capitalism capitalism?

Matias Vernengo