In the previous blog, we discussed the four Capitals. Today we will see the difference between human capital and other resources like land and physical capital. Before getting into it, let’s under the Human Capital theory. 

Human capital theory

The human capital theory views humans as valuable assets that can be developed and invested in to generate economic returns as “resources.” This viewpoint emphasizes the importance of education, skills, and experience in increasing a person’s productivity and earning potential. 

People are viewed as a resource because they provide labor, creativity, and innovation that can contribute to a country’s economic growth and development. In this sense, the phrase “people as a resource” emphasizes the importance of investing in human capital through education, training, and other forms of development to realize the full potential of individuals and society.  

What sets human resources apart from resources like land and physical capital?

Human resources, land, and physical capital are all important economic resources, but they differ in several ways. 

Human resources are people’s skills, knowledge, and abilities that enable them to create goods and services. Unlike land or physical capital, human resources are not limited in supply because they can be developed and improved through education, training, and experience. 

Land is a physical resource that can produce goods and services, such as land and natural resources. In contrast to human resources, land is limited in supply and cannot expand. 

Physical capital refers to the tangible assets used to produce goods and services, such as machines, buildings, and tools. Physical capital can be replaced or improved, but it depreciates over time and must substitute eventually. 

Each plays a distinct role in products and services, and their relative importance varies depending on the industry or sector. While physical capital and land are important, human resources can greatly influence a country’s economic growth and competitiveness. As a result, many governments and businesses view human capital development as a critical strategy for economic growth and prosperity.