By Dr. John Sase
With Gerard J. Senick
“Morality is dictated by family, state, society, church, God, and conscience. Speculative Metaphysics imagines forces and adds them on to what is actually experienced. Materialism makes human beings into automatons whose conduct is the result of mechanical law. Spiritualism makes human beings into slaves of the Absolute.”
–Rudolf Steiner, “The Philosophy of Freedom: The Basis for a Modern World Conception,” 1893 (Rudolf Steiner Press, translated by Michael Wilson from the German, 1964)
I (Dr. Sase) am a practicing forensic and litigation economist. This means that my work includes measuring and analyzing economic losses; preparing written determinations of these losses; consulting with attorneys and their clients; participating in discovery depositions initiated by opposing counsel; and providing testimony of my findings, conclusions, and opinions in courts of law.
Throughout my career, the majority of the cases on which I have worked have involved the determination of economic losses accruing to human beings over time. These damages are due to severe injury or loss of employment as well as to the losses that beset the families of victims who have suffered wrongful death or disablement. In order to perform this work, forensic economists must remain objective while relying upon data, theories, and literature from the subfield of Economics known as Human Capital, the stock of competences, knowledge, and personality attributes embodied in one’s ability to perform any kind of labor that produces an economic value.
Human Capital
Roman statesman and writer Cicero (106-43 BCE) once described a slave as an instrumentum vocale – a tool that talks. As we have entered this current millennium, enfranchised workers not only employ inanimate tools that talk but also have Human Capital Economics (HCE), a language that speaks for us. However, this body of theory and methodologies does not entail reducing the status of human beings to that of machinery, regardless of what Cicero may have said. Instead, HCE constitutes the science of measuring the economic outcome of independent human decisions. Furthermore, HCE helps to document, predict, and scientifically support the value of forensic economic analysis to any legislative or judicial body.
In the field of Economics, the works of Jacob Mincer and Nobel Laureate Gary S. Becker form the cornerstones of the Theory of Human Capital. A half-century ago, Mincer, Becker, and some of their contemporaries developed modern Human Capital Theory (HCT). HCE came to the forefront with the publication of “Becker’s Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education” (Chicago University Press, 1964) and “Mincer’s Schooling, Experience, and Earnings” (Ashgate Publishing, 1974). The Theory of Human Capital encompasses many concepts and methods. These include 1) mathematical formulae to provide cost/benefit analysis directed toward solving social problems, 2) methods of calculating the economic dividends derived from an investment in education or job training, and 3) formulae for determining the economic benefits of any activity, from reading a book to removing lead from the nation’s gasoline supply in order to improve public health.
Metaphysical Economics?
Modern society holds the common, though albeit superficial, belief that our “Information Age” results from, and is typified by, an increase in the simple access and exposure to cable television, the Internet, and their myriad of permutations that we carry about on our persons. Marshall McLuhan foresaged this phenomenon when he referred to television as a “cool media,” one that draws us into the medium itself and demands our involvement to compile the information that we assimilate (”The Medium Is the Massage,” Bantam, 1967). However, writing at a more fundamental economic level in “Schooling, Experience, and Earnings,” Jacob Mincer describes the technical “know-how” to which we will refer in a contrasting definition of the Information Age. He states, “The investment-earnings relation is a sense of describing equilibrium loci in the capital market as well as in the labor market in which Human Capital is supplied as a factor of production.”
In other words, technical know-how (information) has emerged as an element as fundamental to economic success as raw materials, tools, or financial capital. In addressing this issue, Mincer and Becker both provide the methods of calculating the economic value of an individual’s “Human Capital” by analyzing such factors as education and on-the-job training, age, experience, and social background. Furthermore, we now use these methods to form mathematical trajectories determined by measurement of these combined factors as they vary over time. The tools developed by Mincer and Becker provide us with a moving picture of Human Capital rather than a still-life. Nevertheless, this model remains a mechanistic one.
On a base level, Human Capital represents accumulated know-how, a point addressed by Buckminster Fuller in his last book, “Critical Path” (St. Martin’s Griffin, 1982). Bucky tells us, “The large issue today is the technical know-how that governs the transformations of energy between its two states. Know-how is metaphysics. Metaphysics now rules.” (Note: Metaphysics is concerned with explaining the fundamental nature of being and the world.) Fuller further describes metaphysics as “consisting only of weightless, dimensionless, abstract thoughts and mathematical principles....” Therefore, in its essence, one could consider modern HCE as “Metaphysical Economics.”
Fuller continues, “When the head of one of the USA’s largest banks was asked what ‘commodities’ were involved in that bank’s import-export dealings with the rest of the world on behalf of the Chinese government, he answered that know-how was the prime commodity being acquired by the Chinese through that bank.” Following this line of thought, Human Capital gains its value when know-how is translated into human action.
However, let us ratchet our discussion to a higher notch by paraphrasing Rudolf Steiner’s explanation of this phenomenon from his Anthroposophical point of view (Note: Anthroposophy postulates the existence of an objective, intellectually comprehensible, spiritual world that is accessible to direct experience through inner development.) The individual, the “I,” manifests him/herself through the “Id,” that develops an “Idea” through the Human Mind. One transforms this Idea (the know-how) into action through the Human Heart. This suggests that Human Capital must transcend the simple mechanics and metaphysics that cloud our perception and contribute to our superficial vision of this Information Age. Instead, the concept of Human Capital must act through our individual and collective Human Hearts. This must be true if we are to stay the critical course that leads to a positive long-run outcome for humanity.
The Practical Application of HCE
Within the legal sphere, a forensic economist relies heavily on the methodology and the intellectual weight of Human Capital Economics. However, lacking higher vision, the measure of Human Capital runs the risk of degeneration into Cicero’s instrumentum vocale. Even though maintaining intellectual and emotional clarity is not easy in the face of the tragedies that call for our professional services, we, as forensic economists, must maintain empathy with the humanity that we measure. Steiner warned us of these hazards in our struggle to be free, as it is people not machines that we must be.
This clarity and vision is offered to us, in part, by the metaphysical understanding of Human Capital verbalized by Fuller, the esoteric Anthroposophical intuition of human and spiritual freedom proffered by Steiner, and any path for espousing goodness in the world through the teachings spoken or written by wise and holy men and women throughout the ages. Maintaining clarity and higher vision must accompany forensic economists as we remain firmly grounded, plying the tools derived from the practicable works of Becker, Mincer, and others. After all, their theories, which derived from empirical research, have supported the time-tested ways of measuring and determining economic damages.
Though less than perfect in their ongoing development, these tools continue to work. For example, the Departments of Labor and Education utilize Becker and Mincer’s formulae to arrive at published estimations. The U.S. Congress relies upon researchers who use the same economic tools as a means for testing the future impact of current Federal programs. On a more immediate level, we who work as forensic economists use some form of HCE in our determination of lifetime losses in cases of wrongful death, personal injury, and employment law.
It behooves the forensic economist to implement the social philosophy of Economics, which stands as the bridge between the social science of Economics and human behavior based upon deeper beliefs or, at least, upon Animal Spirits (Animal Spirits is an ancient term that economists use to describe the naive optimism of putting aside the thought of ultimate loss in any venture. The source of these animal spirits remains something of a mystery.) Therefore, let us consider an illustrative example for the purpose of clarification, a conundrum posed many times throughout human history. This conundrum involves the dilemma of a soldier who must decide between fight and flight. To understand his/her plight, the seemingly contrasting dimensions of Human Capital Theory cannot explain fully why this soldier makes an instantaneous decision in the heat of battle: Should s/he stay at his/her post and face certain death rather than flee? What exacerbates the issue is that the soldier may be serving with comrades-in-arms on the battlefield. If the soldier is alone, s/he may run. However, when serving with others, s/he may decide to stay, even if it means laying done his/her own life for the sake of fellow soldiers. Embracing the unity of both dimensions of Human Capital helps to clarify our understanding of such a difficult and instantaneous decision. See Steven Spielberg’s film “Saving Private Ryan” (Amblin Entertainment, 1998) for an excellent example of this theme.
To summarize, much of the work performed in the field of forensic economics involves the valuation of human life. Practicality in our courts of law demands that we determine an accurate measure of a person’s worth to themselves and his/her family. As a result, the concept of Human Capital Economics (HCE) has developed and must continue to evolve.
However, heeding Cicero’s warning, we must avoid considering human beings as mere tools that talk, lest we retrace the exoteric path that led to the denigration of humanity that occurred in Europe during the 1930s and early 1940s and elsewhere throughout the world in succeeding decades. Therefore, the measurement of human value must embrace both sides of its nature, which should be taken as a whole rather than as two separate, opposing parts. To do so must remain a matter of ultimacy to us as a species. Therefore, in closing, let us recall the words of Alfred Marshall, the founder of Modern (Neo-Classical) Economics, who stated in his “Principles of Economics” (Macmillan, 1892), “The most valuable of all capital is that invested in human beings.”
Dr. John F. Sase of SASE Associates, Economic Consulting and Research, earned his MBA at the University of Detroit and his Ph.D. in Economics at Wayne State University. He is a graduated of the University of Detroit Jesuit High School. Dr. Sase can be reached at (248) 569-5228 and by e-mail at drjohn@saseassociates.com.
Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a Supervisory Editor at Gale Research Company (now Cengage) for more than 20 years. Currently, he edits books for publication and gives seminars on writing. Mr. Senick can be reached at 313.342.4048 and by e-mail at gary@senick-editing.com.
