In the October, 1961, issue of this Journal, my article on Valuation of Human Capital presented estimates of the capitalized values of expected lifetime earnings for males at various ages. At a 4 per cent rate of discount, the gross value (without deduction for consumption) of a male, age twenty to twenty-four, was $55,950. Thus, the gross value of 1,113 such men would be $62,272,350, or, rounded off, $62 million. The 1,113 is the number of Cuban prisoners from the Bay of Pigs invasion, and $62 million is the ransom demanded for many weeks by Fidel Castro!

As technological developments have altered production techniques, types of mechanical equipment, and varieties of outputs, society has begun to recognize that economic progress involves not only changes in machinery but also in men – not only expenditures on equipment but also on people. Investment in people makes it possible to take advantage of technical progress as well as to continue that progress. Improvements in health make investment in education more rewarding by extending life expectancy. Investment in education expands and extends knowledge, leading to advances which raise productivity and improve health. With investment in human capital and non-human capital both contributing to economic growth and welfare and in what is probably an interdependent manner, more attention should be paid to the adequacy of the level of expenditures on people.

This paper considers some of the shortcomings of an income per I capita measure of and suggests an alternative capitalized value of expected future income per capita. Part I considers briefly some of the variables that a generally acceptable empirical welfare function should include and defines the capital value measure; Part II compares this measure of with the commonly used measure, income per capita; Part III presents and analyzes the results of computations of economic well-being for a number of United States cities, by both measures; Part IV considers some implications of a present value measure for interregional migration.

The market mechanism places a value on those assets to which title can be transferred, and thus the market does evaluate land and capital goods in our economy. The market also provides rental values (wage rates) for labor but not capitalized values, and these are frequently essential for rational decision-making.2I t would be useful if we could develop a substitute for the market evaluation of labor resources. This involves establishing a conceptual framework for estimating the value of assets in the form of human capital. Utilizing such a framework, quantitative estimates of capital values of people as productive assets, as a function of their sex and age, can be made. The objectives of this paper are to point up the usefulness of the concept of human-capital value, and then to develop the methods, discuss some of the difficulties, and finally to present the results of actual calculations of capitalized values of (male) human assets for the year 1950. In addition, some implications of the results for decisions on resource allocation will be considered.

This paper attempts to shed new light on the extent to which college education brings financial returns. It recognizes the existence of a number of variables that are likely to affect the financial returns that education produces for a given person -particularly the student's ability and motivation, and the quality of his schooling. It attempts to isolate returns to education from returns to these other related variables.

I. The conceptual framework, 396. — II. The model, 402. — III. Empirical application, 406. — IV. Some extensions of the analysis, 411. — V. Conclusion, 421.