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Human capital is a company asset, but it’s not listed on the balance sheet.  Human capital is all of the creative skills and knowledge embodied in the employees of a company -- skills that bring economic value to the business.  It’s knowing the “how-to” of producing goods and services in the most efficient manner. 

The term human capital was first used by a number of economists in the late 1950’s and early 1960’s.  Those references spoke of human capital in terms of labor used to produce manufactured goods.  Others, like economist Theodore Schultz, expanded the term to include a value for human potential.  The idea is that human capital, like any other type of capital, can be utilized more efficiently and thus lead to improvements in production quality and quantity.

In a wider use of the term, mostly by economists, human capital is the collective wealth of knowledge, talents, training, skills, judgment and accumulated experiences for a population.  Adam Smith refers to this concept in his book An Inquiry into the Nature And Causes of the Wealth of Nations.  Smith states that improvements to human capital through training, education and experience make the individual enterprise more profitable, but also add to the collective wealth of society.

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