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Quotation of the Day…

… is from page 12 of Robert Higgs’s 1971 book, The Transformation of the American Economy: 1865-1914 (footnote deleted):

It is useful, then, to distinguish at least three kinds of capital – material, human, and intellectual.  In the long run it is impossible to build up one part of the capital stock without also building up the others.  The Commissioner of Patents in 1900 clearly recognized this interdependence: “To employ these devices [American inventions] to the best advantage requires the intelligence of the American workmen, and the result is due to the combination of witty inventions and thinking men.  Witless men behind witty machines would be of no use.”  Understanding these interdependencies is at the heart of understanding the process of economic growth, but unfortunately scholars have devoted little attention to them.  To build factories is commonly recognized as an investment, but to obtain eduction, to purchase improved health, to seek new useful knowledge – these too are investments.  And the rate of return on investment in a particular kind of capital depends not only on the size of the existing stock but also on the available stocks of complementary kinds of capital.

Economic reality is far more complex than too many economic models – and too many pedestrian economic ‘analyses’ – make it out to be.