Sunday, May 08, 2011

Human Capital or Capital, Comic Book Edition

I recently shared an article about how college debt has just outgrown credit card debt. My general response was that the average $24,000 in college debt doesn't seem that bad, especially if the average starting salary of a college graduate is $48,351. I also know what it's like to pay off school debt in similar income-to-debt proportion above.

But this got me thinking. What's better for an economy, smart people or effective machines? I came across a great thought experiment in this BBC article about Superman. Apparently the last son of Krypton is considering separating himself from the United States. So here's my question, who would be better for US economic growth, Superman (as capital) or his nemesis Lex Luthor (human capital).

In spite of my love for the Man of Steel, I think that Mr. Luthor would be better for long term economic growth. Here's why: Superman is a great asset to any economy. He's super strong, super fast, super everything. He could decrease crime easily. He could do construction is a fraction of the time. He could even help during natural disasters, which we seem to have plenty of recently.

But Superman dies. Although he ages very slowly, he does get older which mean he will eventually die. Lex Luther on the other hand can use his extreme intelligence to create a second Industrial Revolution bring us unimaginable prosperity. This is shown perfectly in my favorite comic book of all time Red Son.

It's a re-imagining of the Superman story as if he was born in Soviet Russia, not the United States. In this alternate storyline Lex Luther (though still power hungry) is the good guy protecting the American way. After Superman is "defeated" (I don't want to spoil too much), Luther goes on to lead America and Earth into great wealth. Whether in comic books or in life, human capital has more long term value than simple capital:
They found that intelligence made a difference in gross domestic product. For each one-point increase in a country's average IQ, the per capita GDP was $229 higher. It made an even bigger difference if the smartest 5 percent of the population got smarter; for every additional IQ point in that group, a country's per capita GDP was $468 higher.
Especially the smartest people:
researchers analyzed test scores from 90 countries and found that the intelligence of the people, particularly the smartest 5 percent, made a big contribution to the strength of their economies.

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