INTRODUCTION: next section I bring in social and cultural


The paper seeks to engage
with the concept of human capital as presented by Becker (1994) by
incorporating other forms of capital viz. social and cultural capital. In doing
so, I believe that one can delve deeper into why some students perform better
than others or why there is a difference in investment levels among different
individuals which result in difference in the distribution of income. I shall focus
on the second question by bringing in Becker’s theory of human capital,
particularly the model where he relates earnings, investments and rates of
return.  The primary task of this paper
is to situate the rational individual in the society. In other words, what I
intend to do is to understand how the investment levels that vary between
individuals might be the result of difference in social capital as well. Also,
one might argue that the socially embedded individual who is accumulating human
capital is undergoing a transformation by way of interacting with others in the
organization (say schools or colleges). Thus in the process of accumulating
human capital, other forms of capital i.e. social and cultural get formed. This
gets transmitted over generations. There is also contribution of other forms of
capital; say social capital in strengthening incentives in the accumulation of
human capital by virtue of trust and norms in institutions. (Gradstein & Justman, 2000; Dasgupta, 2002) argue
how public education helps in instilling civic virtues by increasing social
cohesion which helps in building human capital. Thus social capital which is a
functional entity as Coleman (1988) puts it helps an actor to gain access over
certain resources. This access over certain resources would mean that some
would be able to benefit more from investing in human capital. The focus of the
paper is primarily on Becker’s model which explains the difference in
distribution of income as difference in the investment of human capital.  What I try to answer with the help of theories
on social and cultural capital is something related to Becker’s question
(related to personal income distribution) as to why investment levels and rate
of return vary among individuals. His approach was a neo classical one with
demand and supply interaction explaining differences in the investment levels.
The differences in supply and demand conditions result in differences in
investment levels as Becker points out. In the first section I discuss Becker’s
Model in nutshell and in the next section I bring in social and cultural
capital to answer some of the questions on ability and family background raised
by Becker. The interplay of various elements- human capital, social capital and
cultural capital determine decisions on educational investment. The return from
investment which depends on IQ as developed in Becker’s model is a derivative
of family resources which the model misses out.

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Becker’s Model

Gary Becker is one of the economists
who developed an economic approach to human behavior. One of his models is on
investment in human capital. Human capital is embodied in individuals in the form
of knowledge and skills. Expenditure on education is thus an investment in human
capital since education increases the chance of future earnings, making life better.
In his model, Becker showed how the investment in human capital is linked with
the distribution of earnings. He defined human capital as “activities that influence
future monetary and psychic income by increasing resources in people” (Becker
1994, pp.11).  The underlying assumption
is that of a rational individual who calculates the cost and benefit of his
investment decision in education. His decision is spread over several time
periods. Thus this ‘representative person’ calculates present discounted value
of his return and cost. Now the investment pattern is different for different
individuals because of the difference in the rate of return obtainable. The
rate of return is calculated by demand and supply interactions. The same person
is faced with supply and demand curves. The demand curve shows marginal benefit
(MB) or rate of return obtained from investment in education. It is downward
sloping because unlike physical capital human capital is embodied in a person.
The diminishing return sets in as investment in human capital increases because
of memory capacity, physical size and time. The supply curve shows the cost of
financing education. It is upward sloping because marginal cost (MC) rises to
produce an additional unit of returns as cost of financing increases. At
equilibrium marginal benefit equals marginal cost at which the present
discounted value of profit is maximized. What is interesting about the model is
that by employing demand supply framework, the model explains how conditions of
demand and supply can actually have an impact on the amount of investment. He
then considers how the distribution of earnings and investments are determined
by the distribution of ability, tastes, subsidies, wealth and other variables. This
explains why there is variation in the amount of investment in different
individuals. In this connection he presents two approaches to understand
differences in the level of investment- the egalitarian approach and the elite approach.
In the egalitarian approach, demand is same for everybody but supply conditions
differ. This implies that the demand curve remaining unaltered changes in
supply curve would give us different levels of investment. In this case
opportunities that the individuals get differ resulting in differences in the
amount invested by different individuals. Lower supply curve would mean cheaper
sources of funding. Thus policymakers can bring about equality by making funds
available to the lower strata of population. In the elite approach, supply
conditions are identical (i.e. everyone has effectively more or less same
opportunities) and the demand conditions vary among individuals. The difference
in demand conditions implies that the benefit obtained by individuals in the
process of investing is different i.e. some individuals expect more to benefit
from investing than others. This difference is attributable to factors like ability
to gain from investment which might be self-assessment of one’s own self, high
IQ, physical size etc. This ability to benefit from investment in human capital
results in the formation of an elite group. Some of the interesting insights
that came out explicitly from this model and discussed by Becker at length is
relevant to what we see in case of education. Supply conditions do not vary
independently of demand conditions. For instance, the people who are abler are
likely to get public and private scholarships which means that the supply curve
shifts downwards. Children from high income families probably on the average
are more intelligent and obtain more psychic benefits from human capital. Becker
also talked about family backgrounds in explaining differences in earnings due
to difference in investment levels.  

The model brings to the fore some
pertinent questions like difference in ability, family background etc. to
explain differences in investment patterns and earnings. But the model does not
explain as to why people have different abilities and why difference in family
backgrounds matter for education. One might wonder as to how high IQ is a
measure of ability as ability of an individual is an amalgamation of different
factors resulting from differences in the social and cultural factors. Also,
the question of why ‘children from high income families on the average are more
intelligent and obtain psychic benefits from human capital’ (Becker1994) remains
a question in the Becker model which needs to be answered. This can only be
answered by taking insights from other disciplines. The difficult task is to
find a consensus between disciplines in understanding the individual as
‘atomistic’ ‘self-interest driven’ or as ‘actor as socialized and action as
governed by social norms, rules, and obligations’ (Coleman, 1988).  Coleman
(1988) borrows the economic principle of ‘rational action’ for use in the
analysis of social system. He introduced the concept of social capital as a
‘resource for action’. By doing so he brings the social context in neo
classical paradigm.    

There are some points which are not
dealt with in this paper but to my mind pertinent need to be made in this
connection. First, the very assumption of ‘rational’ agents in this model makes
the decisions regarding investment in education rather simple. There are
instances of ‘bounded rationality’ with respect to decision making in education
due to informational constraint. Second is on the issue of considering
education as an investment. It gives an instrumental role to the purpose of
education. Education contributes to economic growth not only by building human
capital but by instilling common norms and regulations that increase social
cohesion (Gradstein and Justman, 2000). Thus the instrumentalist view of human
capital approach undermines the role of education as an end in itself and merely
confines the purpose of education to productivity enhancement tool. It is by
incorporating other forms of capital i.e. social and capital one would
understand what education would mean to different individuals and help us
understand why some people are abler than others.  The next section deals with social and
cultural capital in detail and tries to answer the questions not answered by
Becker in his model.

Interaction of three
forms of capital: Social, Cultural and Human capital

Social capital has been used as a tool
to explain why some children are able to perform better than others or why
there is in general a tendency of children whose parents are well educated and
high paid are able to get more years of schooling. Thus there is a possible
explanation which is connected to family background of an individual (the point
raised by Becker but not answered). The importance of social cohesion,
networks, trust and norms are ignored in human capital approach. The concept of
social capital introduced individuals who are socially embedded into
disciplines such as Economics. Social capital is that analytical tool which
brings other social sciences in the realm of economics. Coleman (1988) defines
social capital by its function which consists of some aspects of social
structures and it facilitates certain kind of action of individuals within the
structure. It is a relational category i.e. social capital comes about through
changes in the relation among persons that facilitate action. Social capital
(at individual level) also refers to a system of interpersonal networks
(Dasgupta, 2002). So one can expect that the ‘elite group’ in which is abler
than others in terms of investment in human capital is a result of greater
formation of social capital. This group might have an access to resources both
financial and symbolic which have made them separate from other groups. Therein
lies the significance of schooling as a process which not only increases
productivity (skill development) as human capital theory suggests but also
instills a sense of ‘being’ in a group or in the formation of networks or
social cohesion which helps in building human capital further. A simple
hypothesis that follows from this discussion is that children who are embedded
in richer and more consistent school-related relationships will obtain more
schooling (Teachman et. al, 1997). Social capital sets the context within which
human capital and other resources possessed by parents may impact the decision
making of an individual. Thus to answer the question as to why some groups are
able to invest more in education than others (demand conditions) one can bring
in the concept of social capital. Some studies have incorporated social capital
in economic models to understand school dropout, creation of human capital and
economic growth (Teachman et. al, 1997; Dinda, 2007). There is further scope of
research in this area by looking at how social capital formed by parents pass
on to the next generation and so on in the form of increased earnings or level
of investment. There is the other form of capital i.e. cultural capital which
too play a role in explaining the unequal scholastic achievement of children
originating from the different social classes by relating academic success,
i.e., the specific profits which children from the different classes and class
fractions can obtain in the academic market, to the distribution of cultural
capital between the classes and class fractions (Bourdieu, 1986).  The attainment of this form of capital i.e.
gaining certificates from taking a particular type of education might result in
more investment in human capital. Cultural capital can also explain the idea as
to why abler people invest more in education. It is more symbolic in nature and
is something embodied in mind. Thus one can expect to have differences in
investment level arising out of differences in social and cultural capital. This
partly explains the difference in distribution of income generating out of
differences in demand conditions (i.e. abilities).


The paper makes an attempt to explain
variation in the amount of investment in human capital by incorporating other
forms of capital –social and cultural capital. It thus so by considering
Becker’s model of personal income distribution where he talks about two
approaches, namely, egalitarian approach and elite approach. Becker raises some
questions in the model like differences in abilities which result in
differences in investment. The paper tries to answer this difference in
abilities through the lens of social and cultural capital. While bringing these
concepts in this structure I increasingly realized that education cannot be
looked as a mere investment as Becker suggested. Because education for some is
a way to gain social mobility and learning is a gain in itself. Also the
purpose of education is towards instilling civic virtues which will help in the
proper functioning of the economy. There is also a symbolic gain that is
attached to it. Some groups would be demanding more education because that
would give them a better sense of self-esteem. To quote Bourdieu (1986)

‘Becker was one of the first to take
explicit account of the types of capital that are usually ignored, never
considers anything other than monetary costs and profits, forgetting the non-monetary
investments and the material and symbolic profits that education provides in a
deferred, indirect way, such as the added value which the dispositions produced
or reinforced by schooling’. (p. 26)

It is thus by incorporating other forms
of capital that we are able to understand the reality better. There is a scope
of further research by incorporating these capitals, particularly social
capital to find out how parents’ networking helps in investment in education of