"Contacts, contacts, contacts"

Commenting on Blair's latest job - advising Zurich Insurance on climate change - Bryan Appleyard says:

I know more about climate change than Tony Blair; if I had a dog and had taken it on my last trip to see Jim Lovelock it would know more about climate change than Tony Blair.

He's right, but misses the point. What Blair's selling is not expertise but contacts - not human capital but network capital.
And there's tons of evidence that network capital matters. Knowing other researchers allows scientists to collaborate on generating ideas. Social capital is often crucial in helping scientists turn inventions into companies. Non-executive directors are often useful not so much for their expertise as their contacts with suppliers or customers. And it's a knowledge of other people that helps entrepreneurs make money; any good salesman will tell you that it's at least as important to know your customer as your product.
It's for reasons like this that the internet and mobile phones can boost economic growth, particularly in Africa, and this may be why the privately educated earn more than the state educated, even controlling for qualifications.
Indeed, it could be that network capital is actually more important in raising incomes than human capital. I mean four things:
1. What looks like a return to experience is in fact a return  to knowing more people. If you've done a job for a few years, you'll have met likely employers and your reputation will have grown. Beyond a certain point, it may be these that raise your earnings more than the technical skills you've acquired from an extra year of work. This, surely, accounts for Blair's high earnings now.
2.  Returns to human capital might be over-estimated, if a university education serves to signal ability rather than merely develop it.
3. This lovely paper (pdf) by Marcel Fafchamps estimates that, among agricultural traders, network capital gives a higher return than human capital.
4. Macroeconomic evidence for a strong link between human capital and subsequent growth is surprisingly weak; see, for example, the critiques here (pdf) here (pdf) and here (pdf). 
Which brings us to a nice irony. Blair famously said the key to economic success, for individuals and economies, was "education, education, education." But his subsequent career demonstrates that what might be more important are "contacts, contacts, contacts."

Comments

[Scratch]

At the risk of appearing unserious I have to say...Marcel Fafchamps is THE best name ever.

[reason]

This rather depends on whether the society is based on making deals or getting things actually done doesn't it. Someone still has to do the grunt work. But maybe the well connected just grab all the credit. Sas but true, probably.

[Bob B]

"Macroeconomic evidence for a strong link between human capital and subsequent growth is surprisingly weak"

I can take that, not least because of issues over the direction of causality. But what of the literature on the private and social rates of return to spending on higher education? Depending on the degree subject, graduates mostly achieve higher earnings than non-graduates.

"Graduates can expect to earn £150,000 more over their lifetimes than those with just A-levels - £250,000 less than previously estimated - a report says.

"Economists at Swansea University said some subjects - such as the arts - could even mean losses, when fees and living costs are taken into account.

"The report, based on the British Labour Survey, blames the increase in student numbers for narrowing the earnings gap. . . "
http://news.bbc.co.uk/1/hi/education/4599267.stm

"Research from the Organisation for Economic Co-operation and Development (OECD) has shown that the graduate earnings premium in the UK is high by international standards, and is lower than those in only five other countries: the Czech Republic, Hungary, Poland, Switzerland and the US."
http://www.prospects.ac.uk/cms/ShowPage/Home_page/What_do_graduates_do__2007/Graduate_employment_and_salaries_review/p!efbkXli

[dearieme]

Arse-licking. Brown-nosing. Back-scratching. And a bit of palm-greasing. That's what Toni is good for.

[Praguetory]

Beautifully written. Cap doffed.