human capital market

Robin Hanson (hanson@econ.Berkeley.EDU)
Wed, 18 Feb 1998 14:42:26 -0800

Wei Dai writes:
>Why cannot I call my broker today and tell him to sell 100 shares in my
>future income stream? Economics tells us the problem is information and
>incentives. Potential investors in my human capital donŐt have enough
>information about my potential income, and it is too costly to monitor my
>activities to make sure that I will work hard and pay the dividends on
>time and in full.

Um, economics does not say this. Economic theory offers us many possible
theories which might explain the lack of direct human capital markets. The
explanation above is only one of many. I think a more likely explanation
is that no one has paid the start up costs to try to get a market like
this going.

>While this should make the economy more efficient and
>everyone better off, it could also increase the inequality of wealth in
>society. ... tempted to trade an expensive lifestyle now for poverty in the

Huh? I would expect this sort of market to increase equality, by allowing
people to insure against the largest risk they face: uncertainty regarding
their future earning potential.

>One reason extropians might be interested in the development of a human
>capital market, besides that it give people choices they didnŐt have
>before, is that it may allow greater investment in human capital in a
>scenario where this is especially risky.

I'd say the more important benefit is to allow people to avoid poverty after
an upload or AI transition. Post-transition, their wages would be worth
much less, but if they've sold some of those wages for non-wage capital,
they'll suffer less a hit on total wealth.

Robin Hanson
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614