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THE DIFFERENT APPROACHES OF HUMAN CAPITAL FORMATION
1DSc in Economics Navruz-Zoda B. N., 2PhD in Economics Shomiev G. U.
1 Uzbekistan, Bukhara city, Bukhara state university 2Uzbekistan, Navoiy city, Navoiy state pedagogical institute
ABSTRACT_
This article describes the results of the research was focused on monitoring expert opinions on the formation of human capital and its approaches. The result of research is proposal for the structure of theoretical approaches towards understanding the nature of human capital and its place in science. The article specifically emphasizes the approaches of human capital in production functions and for the achievement of economic growth, too. In terms of business economics is human capital considered as production factor. According to the managerial view human capital is a business resource or asset which forms part of the market value of the company. Quantitative and qualitative assessments of human productive capabilities and their role in economic development have been identified by England classic scientists of political economy. In this article will be considered the ideas of 19th century famous economists and given conceptions which formed in the beginning of 20th century. Exactly in this period has been formed the conception of human capital in the west economic sciences and highlights the ideas of neoclassical scientists of USA, especially the ideas of scientists of the "school of Chicago" T. Shultz and G. Bakker. The objective and subjective conditions of human capital theory formation will be disclosed.
Introduction. Human capital is a collection of traits - all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a portion thereof.
Human capital theory has been created within the framework of neoclassical research programs and has a deeply methodological base. In the work of 18-20th century famous classical economists are developed the main and basic rules of human activity place, role and features in scope of social production. Nevertheless, the interest to the human capital conception, often, its formation and intensity will be determined by the objective conditions of society historical development. In our opinion, human capital formation and its becoming to current aspect are result of scientific ideas and evolution of socio-economical life of West Country societies and it was done by hundreds of year. One of the most important factors of the sustainable development of the national economy depends on its present and future competitiveness. The peculiarity of competition in the sectors of economy is that the competition requires simultaneous consideration and analysis at several interconnected levels. There are seven levels of economic competitiveness for economy scale: mega-, macro-, mezzo-, meta-, micro-, mini- and mono levels. If mega competitiveness describes the art and ability of farming in global level, macro competitiveness is in governmental level; mezzo- competitiveness is in regional level; Meta competitiveness is in industry and sphere level; micro competitiveness is in small business level; mini competitiveness is in level of household and Mono competitiveness is in level of managers, workers.
Due to this approach the increasing of business competetiviness in mono level needs to develop the business ability of managers in high, middle and small positions. That's why formation, increasing and development of entrepreneurs of human capital have a big importance. In this abstract we will consider the term of "human capital" in the economical competitiveness system, specification of this category, also will be considered the developing stages of human capital theory as an object of mono competitiveness in detail.
The human capital formation - "human productive ability's" approach. By the England classical political economy scientists has been provided first fundamental research in the field of quantitative and qualitative assessment of human productive ability and its role in to economic development. First of all they were considered the education, experience and national health. These issues are dedicated to the works of William Petty, Adam Smith and David Ricardo.
ARTICLE INFO
Received 2 October 2017 Accepted 14 October 2017 Published 7 November 2017
KEYWORDS
human capital, approaches, human working ability, competitiveness, human dignity, personal capital
© 2017 The Authors.
In history of economical formation William Petty was the first who told about human capital value. He was analyzed the "master, sailor, soldier, other human capital values and offered the calculation method of each person's capital value in his famous scientific work which named "Political arithmetic's" in 1676, according to this phenomena human capital is equal to 20 time multiplied of profit which bring from the recourses as land. [15].
Nevertheless Willam Petty did not separated individual positive, constructive, entrepreneurial and valuable skills. Adam Smith emphasizes the high economic value of education and adds it to factors that enhance the country's wealth. In his current theory, Adam Smith's idea of similarity between the process of reproduction of material capital and human capabilities is very important. Adam Smith says, "a man takes a lot of time and effort to study a profession. It can be compared to a valuable car." This labor "covers the education expenses and often can be profitable as capital." David Ricardo the British classic political economist also joins to Adam Smith's idea. In his book named Political Economy and Taxation, he argued that among the reasons for countries' retirement in economic development was "insufficient literacy in all segments of the population" [17]. K. Marks emphasized that increasing physical, intellectual and creative power of a person can be seen as "main producer of society". It is "real wealth", and other material resources are "transient moments of social production." Particularly, the growth of human capacities can be seen as the production of basic capital. This is because the basic capital is considered to be human [8]. Thus, the works of famous classical economists have created the methodological foundations of human capital theory. All the economists' classical researches are based on this and human skilled labor which is main driving force behind capitalist production. This kind of human effort creates more value than investment in it. Adam Smith emphasizes the high economic value of education and adds it to factors that enhance the country's wealth. In his current theory, Adam Smith's idea of similarity between the process of reproduction of material capital and human capabilities is very important. Adam Smith says, "a man spends a lot of time and makes effort to study a profession. It can be compared to a valuable car. "This labor" covers the education expenses and often can be profitable as capital." David Ricardo, the British classic political economist, also joins to Adam Smith's idea. In his book named Political Economy and Taxation, he argued that among the reasons for countries' underdevelopment in economy was "insufficient literacy in all segments of the population" [17]. K. Marks emphasized that increasing physical, intellectual and creative power of a person can be seen as "main producer of society". It is "real wealth", and other material resources are "transient moments of social production." Particularly, the growth of human capacities can be seen as the production of basic capital. This is because the basic capital is considered to be human [8]. Thus, the works of famous classical economists have created the methodological foundations of human capital theory. All the economists' classical researches are based on the human skilled labor which is main driving force of capitalist production. This kind of human effort creates more valuable denomination than investment in it. Idea about investment nature of expenses for human knowledge, experience and professional skills is material production procedure and getting experience and effective abilities of human ability will be methodological base. This idea in classical economical works has become the basic idea of classical economic theories in point of role of human labor in capitalist production and is considered to be "self-evident truth," it was not be considered independently.
The human capital formation - "economical human's approach. Famous economists of the 19th century: L. Valras, G. McLeod, N. Senior, J. Rikardo's and his students J. Makulox and J. S. Mill and I. Fon Tunen, A.Marshal and others developed the ideas of classical economics and enriched the economic thought, including the following new methodological concepts related to human resources within the economic theory:
- concept of "economic people".
- principle of methodological individualism.
J. S. Mill offered to describe in his scientific work in 1836 which named "the subject of political economy as "mental science". He says that this science is about interest of human motives and behavior of peoples in economic life [10]. The first concepts of "economical people" appeared in J. Smalls scientific work. Scientist says that the economic motives can be defined as limiting the pursuit of wealth and calculating free time. N. Senior developed in his works the concept of "real person". This theory was the nearest till today's point of view. In his opinion, the economic human can combine with maximalist activity, taking into account the limitations of rationality [3]. In our opinion, the research program of classical economic theory is based on the methodology of individualism.
This means that all social phenomena can be included in individual activities. The famous philosopher K. Popper describes this principle as following: "The function of social theories is to build and analyze our sociological models. It should be analyzed under the individual opinion, expectations,
and relationship and so on. "[16] The methodological principle of individualism was supported by Adam Smith, D. Ricardo and W. Petty. But J. Miller shaped this principle as the basis of the classical methodology in his methodological book (Systematic Logic (1843). In this work, J. Mill shows a strong connection to the principle of individualism.
Mill argues that the subject of science is the same as the society, but such analytic response is a key element of the science [11]. In the evolution and development of the classical research programs of the XIX century, economists' debates about the nature and essence of capital take an important period. They also coincided with tangible capital as a factor of production and between the ability to work and the other as secondary. Primarily, economists c-an not agree on this issue, "What should be counted as capital?" "Is it necessary to call a human being as a physical entity or to call a human's fertile talent as capital? J. S. Mill has developed such a rule, capital is the inherited and gained capability. J. S. Mill said: "Man's existence is not capital ... But his skills can be capitalized on a full basis" [12]. However, A. Senior says he can capitalize it himself. He says capital is a product of human life expectancy in the future. J. R Mc. Cullox has clearly defined human existence as capital: "There is no valid reason that if we do not consider ourselves a person as capital, many reasons will make it look as a component of national wealth" [5]. L. Valras thinks that the value of human existence is determined as other capital goods. That is why he says the existence of the entire human society is the capital. At the same time, McLeod counted as a capital only productivity, productive person. He says it is impossible to enter an object of economic analysis. German economist-agrarian I. Tyunen says the economy, which estimates human existence, is economically justified: "If the human being was thought as a subject of capital law, his value and worth would be succeeded" [6]. Thus at the end of the XIX century a symmetrical study of human capability and simple capital became commonplace for many economists. Especially, the value of the population's actives is an important asset of the society and this is why it is necessary to calculate the national wealth of the country.
The human capital formation - "personal capital's" approach. Nevertheless, interest in the concept of human capital slightly declined in the early 20th century. Serious researches have not been done in this area. It was the lack of explanation of human resources for the maintenance of classical concepts as a matter of minimal knowledge and capability, ability to work and equally distributed among all workers, the production of tools, the investment attractive, and the objective of society. A. Marshall, the founder of the neo-classical direction in Western economics, has a reputation for being a prominent figure in this era. He brought the concept of "personal capital" to the scientific circulation. This concept is better than human capital. A. Marshall noted that man's wages and other incomes have a lot in common with capital's percentage. There is a general resemblance between the value of material things and the reasons for managing capital: motives are like bringing human capital into capital accumulation, as well as the costs of education "[7]. By examining the ways of accumulating "personal capital", first of all, different forms of education, A. Marshall showed the social value and positive ability of a highly productive person. He argued that there was a need for a flexible system of education for the broader population, and that he had the most beneficial effect on the entire country. Even though the value of capitalizing on a human being is useful, the person who examines it in pure wage capitalism has dropped this notion because the reason for it is "inexperienced" that "human beings are not sold on the market." Historians of economic thought, M. Blauga, argue that A. Marshall "slaughtered the interest in this problem while he was evolving with the science of orthodox science [1]. But in his research, Graham Beckham trusted much more on Marshall than any other economist. There is an objective reason for the fall of scientific interest in the human capital: the enthusiasm of scientists has not been reflected in the social and political capacities. It is unthinkable that the governments of developed countries did not understand the economic benefits of migration, premature mortality, and investment in education. If in the 17th-18th centuries human capital had not exceeded 10 % of the total capital, in 1913 it had risen to 33 % [13]. But in terms of contemporary investment policies, these proportions are very unsatisfactory. In the beginning of the new century, attempts were made by scientists to determine the value of each individual and the entire population on the basis of government requirements and economic necessity. Such research was often of theoretical importance. Some authors used the human capital to estimate the loss of the First World War. "Man is capital," he said, "and the society should also be interested in the reduction of death. It's not just about humanitarian but also economic reasons". E. Bogart said that the loss of life in a war is a "static method of suspicion," he says, and believes that the value of money lost in the war is a great economic value. "[6] G. Boog concludes that there is a strong resemblance between material and human capital. G. Boog also notes that in the evaluation of human capital, it is better to use wage capitalization because it determines the value of material things. N. Seed noted that G. Boag was the first to determine the value of human capital assessment with production cost. Indeed, it is challenging to find out whether it is difficult to determine the cost of living, education, and the ability to get the
benefit from each person's abilities. "Love, pleasure, and pride are not compatible with the production of material wealth" [6].
The human capital formation - "vocational training's" approach. At the beginning of the twentieth century, Professor of Harvard University, J. R. Rouhl the first who calculated the impact of vocational education on US national income. In this process, for the first time, concepts of "alternative storage of production" and "time running - good income - cost advantage" were used. These concepts are widely used as concepts of modern human capital [1]. J.R. Wolsh was interested in the economic value of higher education. J. R. Wolsh's education economics is not only a matter of innovation for that period, but also of practical importance for future research. After decades of Wolsh's practical results and theoretical developments, T. Shults and G. Backer used the theory of human capital. The tension in the political processes of the 30s and 40s and the Second World War declined theoretical work and the demand for them. In the 50-60s, objective conditions emerged for the formation of the theory of human capital. After the Second World War, there is a need for qualified personnel deficit and the interest in the labor market. By the 60s, even in advanced economies, there was a marked slowdown in the concentration of human capital compared to the material accumulation. At the center of attention, the problem of creating qualitatively new workforce, the formation and accumulation of qualified cadres was the problem. The second condition was the development of scientific and technical revolution. He made profound changes in the productive forces of society. In the economy, the role of human personality increased. It was during that period that the average year of schooling in all developed countries enhanced, and the vocational qualification of the workforce was evaluated as one of the most important factors of economic growth. In addition, the rapid growth of the innovation industry in the 50s and 60s required a sharp external political situation and the struggle for scientific and economic supremacy in research field. In advanced developed countries, there was a marked increase in the intellectual production capacity. The main direction of social progress is the development of human self-productivity and the effectiveness of using labor force in economic progress. They encouraged intensive growth in science, education, health, service and recreation.
The emergence and development of the human capital concept. In that period, the concept of human capital emerged in Western economics and the American neo-classical scientists as G. Backer, B. Weyebrod, E. Denisson, J. Minter, I. Fisher, M. Fridman, T. Shults, the Nobel Prize for Literature was published. The concept of human capital, described in T. Schultz's work, attracted public attention. G. Bekker developed the theory of human capital. However, they can not imagine the work and achievements of a science school that educated them, and they were the followers of this school tradition. T. Schultz was not the first to open his human capital, as the review of human capital theory began in 1958, in which J. Mintser published his article [14]. Previously, human capital was understood in the 1976 edition of the theory of quantitative theory of money by M. Fridmen, a laureate of the Nobel Prize in economics. He proposed a monetarist interpretation of human capital and described it as part of a human capital [18]. The theoretical developments in the scientific school from T. Schultz and G. Bekker served as the methodological basis of the theory of future human capital. The role of the theory of economic growth plays an important role in the formation of human capital theory. G. Backer commented, "The main driving factor is that in most countries physical capital growth is a relatively inexplicable part of income. The search for satisfying concepts... generated interest in technical progress and human capital. "[2] That is why the economists were primarily interested in economic growth. Education was interpreted as a source of growth. E. Denisson proved in his researches that the expansion of use of technical innovations and means of production would provide half of the US GDP in the 20th century. He also suggested that social groups that distinguished with the level of knowledge were different in other areas [4]. Cambridge researcher M. Will offered a clear and adequate classification of the "social rentals in education", especially factors affecting age, sex, social potential, talents, and so on [19]. The central theory of "Chicago School" is to explain the economic processes as a neo-classical direction in economic science on the basis of individualized optimization principles. The Chicago school concept assumes that expenses for education, health, migration and other forms of activity are calculated on a rational basis. In the broad sense, human capital is formed by investing in human resources education, seeking information about health, migration estimates and incomes. The main focus is on quantitative analysis.
Summary. In our opinion, for the human capital theory formations were created main subjective and objective conditions in 60s of 20th century. Necessary objective conditions that call for reconsidering the economic role and knowledge of human beings as monopolistic objects are as follows:
- Objective change in the composition and combination of community production forces;
- Scientific - technical revolution in the middle of 20th century;
- Science becomes a direct production power;
- Intelligence and information of production and management processes.
- Subjective conditions of human capital theory formation are as follows:
- Economic theory and internal political economy;
- Transition from the material interpretation of the source of production to the characterization of the productive forces, the scientific, intellectual, and human creativity ideas.
Human capital is an economic category which is now often used. Based on realized theoretical research, we have confirmed the hypothesis that there are at least two different scientific approaches to understanding the nature and importance of human capital. The research results is a summary of definitions of human capital, proposal of structure of different approaches to understanding the nature and importance of human capital. There are some accesses to the definition of human capital and approaches to the human capital according to some economists and economic theory schools. In microeconomic view, there are two basic approaches. In terms of business economics, the human capital is considered as the production factor. According to the managerial view, the human capital is a business resource or asset which forms part of the market value of the company. The macroeconomic approach sees human capital as one of the production factors, respectively sources of economic growth. Thus, as a result of the research of the stages of the formation of the term "human capital", it was concluded that if business entities gained and expanded human capital, their entrepreneurial activity would be so successful and profitable. That's why the competence of business managers, the quality and efficiency of the staff and workers' activities are an important factor for increasing the competitiveness of businesses.
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