William Farr on the Economic Value of the Population

The modern theory of human capital came to prominence in economics only in recent decades, but its antecedents can be traced back to the earliest economic writings. The notion that human skills represent economic value comparable to that of capital was clearly articulated by the classical economists, notably by William Petty and Adam Smith. That improvement of skills and increase in the number of persons in whom skills are embodied are sources of economic progress follows from their conceptual clarification. Attempts to quantify the economic value of the population and assessment of the effect of mortality improvements and population growth were, however, later developments. Among the earliest contributions to such calculations, one by William Farr, published in 1877 and reprinted below, is particularly notable. Defining the economic value of a person as the discounted sum of expected future earnings, Farr arrives at a figure of £5,250 million (for 1876) “as an approximation to the value which is inherent in the people [of the United Kingdom], and may be fairly added to the capital in land, houses, cattle or stock, and other investments.” In addition to providing insightful commentary on the rationale and weaknesses of his calculations, he estimates the addition to that amount from population growth in the preceding four decades, discusses the impact of outmigration to the colonies and the United States during that time, and notes the dependence of the economic value of the population on the level of education, on the state of health of the population, and on people's longevity. William Farr (1807–1883) was perhaps the most influential British statistician of the nineteenth century. Although trained as a physician, in 1839 he accepted a post in the General Register Office and from 1842 to 1880 he served as Statistical Superintendent. During his long tenure he was the main force in the development and analysis of British vital statistics and in setting the foundations of modern epidemiology. He constructed the first British life table (based on deaths in 1841) and carried out a wide range of creative analyses of British mortality statistics, especially on mortality differentials, with an aim of promoting social reform. The most accessible route to his written output for modern readers is a posthumously published collection: Vital Statistics: A Memorial Volume of Selections from the Reports and Writings of William Parr (London: Offices of the Sanitary Institute, 1885). A reprint edition of this work was published under the auspices of the Library of the New York Academy of Medicine (Metuchen, N. J.: The Scarecrow Press, 1975). The passage reproduced below (pp. 59–64) is an excerpt from the Registrar‐General's 39th Annual Report (1877), titled The Economic Value of Population. The topic was earlier treated in Parr's paper “The income and property tax,” Quarterly Journal of the Statistical Society of London (March 1853), excerpted on pp. 531–550 of the book under the title Cost, and the Present and Future Economic Value of Man.