Investing in people : the economics of population quality

The most important economic resource in the world, according to the Nobel-prizewinning economist Theodore W. Schultz, consists of the acquired abilities of people - their education, experience, skills, and health. This "human capital"- not space, energy, cropland, or other physical properties of the earth-is decisive in improving the welfare of poor people through out the world. Investments in population qual ity through schooling, work experience, and improvement in health enhance human capital and contribute importantly to productivity and to personal satisfaction. With rise in income parents reveal a preference for fewer children, substituting quality for quantity. Research con tributes substitutes for cropland and for other scarce physical resources, including energy.

Poor people are no less concerned to improve their lot and that of their children than rich people are. Professor Schultz contends that the potential economic productivity and well being of the world's poor are not realized primarily because of economic distortions by governments and aid programs that fail to rec ognize the importance of human capital - a conclusion of significance for both high- and low-income countries and of special relevance to the International Donor Community.