Human Capital in the Context of the Principle of Diminishing Marginal Returns

The article examines the historical prerequisites for the emergence of the concept of the principle of diminishing returns of production factors. The analysis of the manifestation of this principle in the context of all factors of production. As a result of the analysis of the characteristics of human capital,  an approach is proposed according to which the principle of diminishing marginal return does not apply to investments in human capital at the macrolevel and in the long term. It is shown that human capital at the macro level and in the long term (in the context of long waves of economic cycles) shows a trend  of increasing returns. And it is the increasing return on investment in human capital that prevents the manifestation of diminishing returns on other factors of production. The reasons that determine  the increasing return of human capital, as opposed to the physical, are systematized, among which:  it, during a certain period of the process of use, improves, grows in quality and accumulates; does not disappear without a trace, contributes to the growth of human capital of other individuals, investments in human capital provide positive externalities, the component of human capital is a resource of knowledge, is inexhaustible and shows an exponential growth trend, the process of investing in human capital is greatly influenced by national, historical, psychological and socio cultural factors, investment in human capital, as a rule, provide a high rate of return.

1. Rumyantsev A. M. Political Economy: Economic Encyclopedia. In 4 vols. Moscow, Soviet encyclopedia Publ., 1972. (in Russ.)

2. Malthus T. R. Experience about the law of population. Transl. by P. A. Bibikov. St. Petersburg, 1868. (in Russ.)

3. Marshall A. Principles of Economic Science. Moscow, Progress Publ., 1993. (in Russ.)

4. Arrow K. J. The Economic Implications of Learning by Doing. Review of Economic Studies, 1962, vol. 29, no. 1, p. 155–173.

5. Uzawa H. Optimal technical change in an aggregate model of economic growth. International Economic Review, 1965, vol. 6, no. 1, p. 233–240.

6. Lucas R. E., Jr. On the Mechanics of Economic Development. Journal of Monetary Economics, 1988, vol. 22, no. 1, p. 3–42.

7. Nelson R. R., Phelps E. S. Investment in humanas technological diffusion, and economic growth. American Economic Review: Paper and Proceedings, 1966, vol. 51 (2), p. 69–75.

8. Barro R. D., Sala-i-Martin X. Technological Diffusion, Convergence, and Growth. Journal of Economic Growth, 1997, no. 2, p. 1–26.

9. Mankiw G., Romer D., Weil D. Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 1992, May, vol. 107, no. 2, p. 407–437.

10. Todaro M. P. Economic development. Transl. from English. Eds. S. M. Yakov- lev, L. Z. Zenin. Moscow, Unity Publ., 1997. (in Russ.)

11. Romer D. H. Increasing returns and long-run growth. Journal of Political Economy, 1986, vol. 94 (5), p. 1002–1037.

12. Mayilyan F. N. The role of social capital in the formation and implementation of human capital. Tomsk State University Journal of Economics, 2012, no. 1 (17), p. 21–62. (in Russ.)

13. Kondratyev N. D. Problems of economic dynamics. Moscow, Economics Publ., 1989. (in Russ.)

14. Mayilyan F. N. The indicator of total factor productivity as an indicator of inclusive economic growth. Armenian Economic Journal, 2019, no. 1, p. 74–83. (in Russ.)