As economics and other social sciences improved their analytical apparatus
throughout the twentieth century, it became increasingly clear that, despite
major technical refinements, their tools were not able to account entirely for
observed variations in cross-country levels of economic development. Indeed,
these tools – in particular as used in neoclassical growth theory – were not fully
successful at explaining why countries with similar endowments of natural and
physical capital experienced vastly different rates of growth and levels ofper
capitaincome. At the same time, development practitioners in the field were
observing variations in project performance that could not be fully explained by
differences in the quality and quantity of the inputs. Equally surprising was the
observation that apparently similar communities exhibited very different track
records in managing common resources or organizing for the common good.
By the mid-1960s researchers and practitioners had come to recognize that
the quality of the labor factor of production was as critical as its quantity in
assessing the impact of human input on growth and development (see Becker
1962, Schultz 1963). Although the subsequent search for a scientifically satisfying definition and measure of “human capital” was only partly successful,
the concept has since been largely accepted by the academic, practitioner, and
policymaking communities.