Robert Lucas argues that there are ________ returns to human capital, and any productivity increases are not completely captured by individuals as they decide how much education to purchase. As a result, the market produces ________ education and training.
A)increasing; too much
B)decreasing; too much
C)increasing; too little
D)decreasing; too little

Question

Quizplus · Accepted Answer

Robert Lucas argues that there are increasing returns to human capital, which means that the more education and training an individual has, the higher the productivity increase. However, individuals do not capture all of the productivity increases themselves, as the benefits spill over to society. As a result, the market underproduces education and training, leading to too little investment in human capital.

Robert Lucas Argues That There Are ________ Returns to Human