The addition of a final “e” to the adjective “human” shifts its meaning in the direction of benevolence, as in ‘‘humane capitalism”.
During the twentieth century, the role of state spending and social insurance in Great Britain, the U.S., and France expanded along with increased female labor force partici- pation.1 Debates over the appropriate roles of public programs and private enterprises cycled along with the rise and fall of state socialism, periods of economic stress, and military conflict.
Those who believed that public action could help solve coordination problems, like John Maynard Keynes, demanded a larger role for government. Those with greater confidence in self-interest, like Milton Friedman generally cheered for market forces. True believers in both camps were sure that they could achieve the greater good of the greater number.Economists in both camps were impressed by the contribution of increased education to technological change and improvements in living standards.
Since education has typically been both mandated and subsidized by governments, one might assume that enthusiasm for it would lend support to advocates of the public sector. But economists Theodore Schultz and Gary Becker developed a compelling model of education as the outcome of individuals’ decisions to invest in their own and their children’s human capital. Employers would gain from rewarding such investments unless they fell prey to an economically irrational, discriminatory preference to choose workers based on superficial traits such as sex or race.
Originally built on individualist foundations, the neoclassical theory of human capital led almost inevitably to an emphasis on family decisions and an appreciation of family work. In this respect, Gary Becker’s Treatise on the Family transcended the most conspicuous inconsistency of the Marshallian legacy. Yet Becker’s allegiance to the virtues of self-interest made him reluctant to concede its implications for conflict within the family. Despite brilliant insights into the causes of gender inequality, the role of the state and the formation of preferences, Becker relied heavily on the assumption that altruism would pervade—but seldom reach beyond—family life.