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Page 105
to get the training, and could meet minimum quality standards, there would tend to be overinvestment in human beings, since individuals would have an incentive to get the training so long as it yielded any extra return over private costs, even if the return were insufficient to repay the capital invested, let alone yield any interest on it. To avoid such overinvestment, government would have to restrict the subsidies. Even apart from the difficulty of calculating the "correct" amount of investment, this would involve rationing in some essentially arbitrary way the limited amount of investment among more claimants than could be financed. Those fortunate enough to get their training subsidized would receive all the returns from the investment whereas the costs would be borne by the taxpayers in generalan entirely arbitrary and almost surely perverse redistribution of income.
The desideratum is not to redistribute income but to make capital available at comparable terms for human and physical investment. Individuals should bear the costs of investment in themselves and receive the rewards. They should not be prevented by market imperfections from making the investment when they are willing to bear the costs. One way to achieve this result is for government to engage in equity investment in human beings. A governmental body could offer to finance or help finance the training of any individual who could meet minimum quality standards. It would make available a limited sum per year for a specified number of years, provided the funds were spent on securing training at a recognized institution. The individual in return would agree to pay to the government in each future year a specified percentage of his earnings in excess of a specified sum for each $ 1,000 that he received from the government. This payment could easily be combined with payment of income tax and so involve a minimum of additional administrative expense. The base sum should be set equal to estimated average earnings without the specialized training; the fraction of earnings paid should be calculated so as to make the whole project self-financing. In this way, the individuals who received the training would in effect bear the whole cost. The amount invested could then be determined by individual choice. Provided this was the

 
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