Human Capital and the Theory of Life-Cycle Investing
by Paula Hogan
Human capital is something we all have, and it’s becoming a front of mind issue in the press and in the field of financial planning.
What’s up with that?
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For economists, there is a very specific definition for human capital. They say it is the value of future earned income expressed in today’s dollars as if it were a lump sum.
That’s an idea that makes conceptual sense, but is hard to specify in a practical sense. Who really knows what the range and pattern of their future earnings will be?
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