Human capital theory

Human capital theory is the most influential economic theory of education, setting the framework of government education policies since the early 1960s. After a period of eclipse, there was a major revival of human capital policy after 1985 – in more free market guise than before – led by the Organisation for Economic Co-operation and Development (OECD). The strengths and weaknesses of the economics of education are encapsulated in this body of theory. Its central assumptions have never been grounded empirically, yet they have found their way into common sense about education. This chapter is a critical history of human capital theory and policies from their beginnings in the seventeenth century.