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Ballparking the value of a skill

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Some types of knowledge and skill deliver enduring human capital: they provide machinery for understanding and navigating the world and making decisions that, in the aggregate, affect one's life outcomes considerably. Other types of knowledge and skill deliver little human capital. This page considers the puzzle of how one might ballpark the human capital value of a skill.

Of course, the human capital value of a skill is not the only consideration when determining whether to acquire it. The cost in time and money, as well as other gains from acquiring the skill, including signaling gains and consumptive benefits of the learning process, need to be factored in.

Reading and writing: a worked example

We keep hearing of how it's important to be able to read. But why is it important? One way of trying to judge the importance of our reading ability is to measure the extent to which individuals steps in our regular, daily lives depend on our reading skills. A slight variant is to imagine how an illiterate person might navigate life in our place.

Illiteracy can be thought of as selective blindness -- blindness to street names, to road safety signs, to store signs, to brand names on items at the supermarket, to restaurant and cafe menus.

  • Illiteracy significantly affects one's ability to travel to new places. Illiterate people can do fine navigating known geographic regions, drawing on their familiarity with the terrain. But it can be much more cognitively stressful for them to venture out into new areas on their own. They cannot understand maps too well, and cannot read street names and road signs. This means they need to memorize long lists of oral directions (or use diagrams, but even here, they need to have the skills of translating a geographical map to a two-dimensional diagram). Even though people can ask around for directions, it can be embarrassing to do so repeatedly.
  • An illiterate person would have more trouble navigating a new restaurant or cafe. Because of difficulty reading menus, he or she would need to ask other people to read out menu items and prices. This can be socially embarrassing. To avoid embarrassment, the person may just end up ordering a standard item with a high probability of availability and whose cost would not be too high. Similarly, it would be difficult to identify brands of items at a supermarket, or even figure out what types of items are in what aisle. Again, the person needs help navigating the supermarket. The person may not be able to read expiry dates and therefore may need assistance from others even for such mundane tasks.
  • An illiterate person has difficulty reading instructions for hardware assembly, cooking, machine repair, and many other mundane tasks. The person has trouble reading dosage instructions or ingredient details for medicine and food items. Again, these are non-issues as long as the person sticks to standard items or asks other people. But this does reduce the person's ability to experiment or cope with new situations, and the need to constantly ask others for help can be an embarrassment and make one dependent on others.
  • Illiterate people cannot use text-based communication. For instance, text messages through mobile phones and the Internet are often cheaper and more effective means of communication than voice communication, particularly for asynchronous or one-to-many communications. But lack of literacy means that this option is foreclosed. It also means that others cannot communicate with the person in this manner.
  • Illiterate people cannot read the newspaper or other basic information sources (like Wikipedia) and therefore have to rely on information filtered through other individuals, who may not be in a position or mood to help them, and/or have a vested interest in providing inaccurate information.