What are the similarities between Human and physical capital ?
Human capital is the stock of skills and expertise of a nation at a point in time. While, physical capital refers to the stock of tangible assets that are used in the production process such as buildings, machinery,etc.
Human capital and physical capital are similar because of the fact that the development of both human capital and physical capital require an initial amount of investment, for example, to acquire human capital we spend on education, training, etc. Similarly, we need to spend money in order to possess physical capital. In addition to this, both contribute to the growth and development of a country.
there are similarities between physical and human capital (for example, both depreciate through time), there are important differences:
- unlike physical capital, human capital can not be bought and sold (you can not sell your B.A. to someone else) and there may be consumption benefits from an investment in human capital
- it is much more difficult to diversify risk when investing in human capital (most graduates do not have a portfolio of degrees in different subjects, such as accounting, law, computer science, and economics)