estimated at a little less than a fourth of this sum. My impression is that this
exposure is not yet dangerous. But it needs watching.
The best method to estimate aggregate adult human capital separately is Petty’s. It is present value of future human cash flow. That means pay less invested consumption. If] am right, meaning that Farr, Marshall and Kiker are wrong, invested consumption is negligible among adults. Then Petty was right to capitalize pay with no deduction. And he was right to capitalize aggregate current pay, with no need to model the future. Growth of pay will tend to match growth of human capital. The discount rate to find its present value is expected rated of return. Rate of return is growth rate plus cash flow rate. Evaluating human capital as constant current pay discounted by cash flow rate alone will give the same answer as if we modeled in expected pay growth, but then discounted at cash flow rate plus the same projected
growth rate.
Total human capital is adult capital plus that of the young. That part might be measured at current cost. I won’t attempt either of those calculations here, since
they seem to call for economists expert in interpreting national accounts.
To Do List
Books and papers on economics tend to lead to “policy prescriptions”. That means recommendations on what governments and markets and educators should do. My list begins with getting rid of the double tax on dividends. To get democrats on board, make the effect revenue neutral by raising the corporate tax rate. Dividend rates have been far too low for about 50 years now. They should average 5% to 6% real, as they did in the nineteenth century. The result of low dividends has been dangerous overinvestment in the private sector, with growth hampered rather than enhanced. Charts and tables make it clear that ex ante investment beyond
depreciation recovery is deadweight loss.
Chapter 8 Banks, Money and Macroeconomics 2/8/16 23
HOUSE_OVERSIGHT_011112