Human capital - A Glossary of Political Economy Terms

The only person who can invest in human capital with full confidence that he will not be arbitrarily deprived of its fruits in the future without compensation is the individual in whom the investment is made, so other firms or individuals therefore have much less incentive to invest resources in him or her in this way, even if this might be the cheapest way to increase productivity. Even the individual in whom the human capital is to be embedded may be somewhat deterred from investing by the fact that such an investment is necessarily very illiquid -- that he cannot later recoup any part of the value of his own investment in human capital by selling it off if he should desire to go into some other line of endeavor where the skills involved are not useful. [See also: factors of production, labor, capital]