Investment in human capital yields returns in the future.

Question

Given below are two statements, one is labelled as Assertion (A) and the other as Reason (R).

Assertion (A): Investment in human capital yields returns in the future.

Reason (R): Education and health make people more productive.

Select the correct answer from the code given below:

1. A. Both (A) and (R) are true, but (R) is not the correct explanation of (A)
2. B. (A) is false, but (R) is true
3. C. (A) is true, but (R) is false
4. D. Both (A) and (R) are true and (R) is the correct explanation of (A) (Correct answer)

Correct Answer

Option D — Both (A) and (R) are true and (R) is the correct explanation of (A)

Detailed Solution & Explanation

The correct answer is Both (A) and (R) are true and (R) is the correct explanation of (A).

Key Points

• Assertion is true. Investment in human capital — spending on education, training and health — yields returns in the future in the form of higher earnings and higher output.
• Reason is true. Education and health raise a worker's productivity, which is the mechanism by which those future returns arise.
• (R) correctly explains (A): the return exists *because* a healthier, better-educated worker produces more. Hence option (d).

Additional Information

• Human capital formation is the process of adding to the stock of human capital; the main sources are education, health, on-the-job training, migration and information.
• Human capital differs from human development: human capital treats education and health as *means* to higher productivity, while human development treats them as ends in themselves — a person has a right to be educated and healthy regardless of productivity.
• The concept is associated with Theodore Schultz and Gary Becker, both Nobel laureates in Economics.