UPSC Prelims 2018 Question:

Consider the following statements:

Human capital formation as a concept is better explained in terms of a process which enables

1. individuals of a country to accumulate more capital.
2. increasing the knowledge, skill levels and capacities of the people of the country.
3. accumulation of tangible wealth.
4. accumulation of intangible wealth.
   
   

Which of the statements given above is/are correct?

Explanation:

• • According to economists, “Human capital formation is the process of acquiring and increasing the number of persons who have skills, education and experience which are critical for the economic and political development of a country. Human capital formation is thus associated with an investment in man and his development as a creative and productive resource.” So, statement 2 is correct.
    
    
  • Human capital is intangible, it is endogenously built in the body and mind of its owner. Human capital is not sold in the market; only the services of the human capital are sold and, hence, there arises the necessity of the owner of the human capital to be present in the place of production.
    
    
  • Intangible wealth consists of factors such as the trust among people in a society, an efficient judicial system, clear property rights, effective government, and good education system etc. Human capital formation enables the accumulation of intangible wealth. So, statement 4 is correct.
    
    

• Human capital formation is not associated with tangible wealth and capital accumulation. So, statements 1 and 3 are correct. 
  
  

Therefore, option (3) is the correct answer.

Subject: Economics | Basic Economic Concepts