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What Should The Federal Government Do Essay

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1. What should the federal government do in order to encourage investment in human capital? The decision to invest in human capital is influenced by considerations similar to those that motivate a firm to invest in physical capital: the cost of the investment verse the expected return. For example, investing in a college education may require the one borrow the money for tuition. If the interest rates on the loan rise then people will most be less likely to invest in a college education. Thus, investment in education may be negatively related to the interest rate, much as physical investment is. This is one reason why, in order to encourage economic growth and productivity, the U.S government provides low interest loans for college students, making an investment in college more attractive. Entrepreneurs do not need special additional incentives provided by the government to encourage them to assume the risks of creating a new business. True risk takers believe that their ideas will succeed in the market and have so much of their identities invested in them, they really don’t care if they receive any return at all on their invested time and money, sometimes for several years, as long as they have hope of eventual success. The problem for them is not that they lack motivation; it's that they can't find someone who is willing to provide them with a loan that banks, venture capitalists, and angel investors find too...

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