Answer to Question 1:

Because there is no market for human capital, calculation of the present value of the income streams from it is a meaningless exercise.

Yes or No?


The correct answer is no. The absence of a market for human capital means that ownership claims to the streams of income it generates cannot be bought and sold. This does not mean that claims to the ownership of income streams from human capital are worthless. It merely means that these ownership claims are irrevocably tied to the person in which the human capital is embodied and that the income streams generated by this capital are constrained by the behavior of that individual. Calculating the present value of human capital is frequently an important exercise because it pays to add to one's human capital whenever the cost of learning something new is less than the present value of that additional skill or knowledge.

It is incorrect to say that markets for the income streams from human capital are entirely non-existent. First of all, one can borrow against one's human capital, although the amount that can be borrowed is a much smaller fraction of present value than one can obtain by borrowing against the collateral of non-human capital.

Second, it should be noted that professional athletes in sports such as football, baseball and hockey are "owned" by the teams they play for. And professional golfers and boxers often sell shares in their future earnings streams to investors. In none of these cases is the athlete in any sense a slave. Either a substantial wage is paid based on performance or a large share of earnings is retained by the athlete to provide incentive for him/her to perform well.

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